Making Even/toW E°sier!
Lessons from the
Great Depression
FOR
Learn to:
• Understand key theories about what
led to the Great Depression
• Trace the social, cultural, and
economic effects of the crisis
• Recognize the triggers of the 1929
stock market crash
• Distinguish between a recession
and a depression
Steve Wiegand
Author, U.S. History For Dummies,
2nd Edition
DropBooks
Drop
Lessons from the
Great Depression
FOR
by Steve Wiegand
WILEY
Wiley Publishing, Inc.
Lessons from the Great Depression For Dummies'
Published by
Wiley Publishing, Inc.
Copyright © 2009 by Wiley Publishing, Inc., Indianapolis, Indiana
Published by Wiley Publishing, Inc., Indianapolis, Indiana
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About the Author
DropBootes
has been an award-winning political journalist and
tor more than 30 years. His journalism career has
included stints at the San Diego Evening Tribune, San Francisco
Chronicle, and Sacramento Bee, where he currently covers state
government and California politics.
Wiegand is a graduate of Santa Clara University, where he majored
in American literature and U.S. history. He also has a Master of
Science degree in Mass Communications from California State
University, San Jose.
Wiegand is the author of U.S. History For Dummies, which is in its
second edition. He is also the author of Papers of Permanence
(McClatchy) and Sacramento Tapestry (Towery Books), coauthor of
The Mental_Floss History of the World (HarperCollins), and a contrib-
uting author to Mental_Floss Presents Forbidden Knowledge
(HarperCollins).
He lives in Northern California.
DropBooks
Dedication
DropBsste
dad, for having lived through the Great
my wife and daughter, for keeping me out of one.
Acknowledgments
Thanks first to acquisitions editor Lindsay Lefevere at Wiley for
successfully pitching the idea for this book, and then catching my
pitch to do it. A big thank-you also to Joan Friedman, who served
double duty as project editor and copy editor (the readable parts
are all due to her). Thanks also to art editor Alicia South for making
the nice-looking parts nice looking, and to technical editor David
Goldberg for making the correct parts correct. Everything else is
my fault.
Publisher's Acknowledgments
We're proud of this book; please send us your comments through our Dummies online
registrJHBta form located at http: / /dummies . custhelp . com. For other comments, please
T^cjw*^ ^u^fn^-|^rt^partment within the U.S. at 877-762-2974, outside the U.S. at
[W«02.
Some of the people who helped bring this book to market include the following:
Acquisitions, Editorial, and Media
Development
Project Editor: Joan Friedman
Acquisitions Editor:
Lindsay Sandman Lefevere
Assistant Editor: Erin Calligan Mooney
Editorial Program Coordinator: Joe Niesen
Technical Editor: David Goldberg, PhD
Senior Editorial Manager: Jennifer Ehrlich
Editorial Supervisor: Carmen Krikorian
Editorial Assistant: Jennette EINaggar
Art Coordinator: Alicia B. South
Cover Photos: © Index Stock Imagery
Cartoons: Rich Tennant
(www . the5 thwave . com)
Composition Services
Project Coordinator: Lynsey Stanford
Layout and Graphics: Christin Swinford,
Christine Williams
Proofreaders: Laura Albert,
Laura Bowman, Reuben W. Davis
Indexer: Dakota Indexing
Publishing and Editorial for Consumer Dummies
Diane Graves Steele, Vice President and Publisher, Consumer Dummies
Kristin Ferguson-Wagstaffe, Product Development Director, Consumer Dummies
Ensley Eikenburg, Associate Publisher, Travel
Kelly Regan, Editorial Director, Travel
Publishing for Technology Dummies
Andy Cummings, Vice President and Publisher, Dummies Technology/General User
Composition Services
Debbie Stailey, Director of Composition Services
Contents at a Glance
DropBooks
Introduction...................................................... 1
Part 1: Heading into a Mess ............................... 7
Chapter 1: It Was a Dark and Stormy Decade 9
Chapter 2: Economic Basics: You Say "Depression," I Say "Broke".... 17
Chapter 3: Prelude to Disaster: The Economy Prior to 1929 25
Part 11: Getting Depressed 43
Chapter 4: Going Bust: A Depression Is Born 45
Chapter 5: Coming Face to Face with Hard Times 65
Chapter 6: Troubles on the Farm 85
Chapter 7: Misery Loves Company:
How the Rest of the World Fared 107
Part 111: Living Through the Great Depression ... 125
Chapter 8: On the Road 127
Chapter 9: Demagogues and Desperadoes 145
Chapter 10: Having Fun in Spite of It All 159
Chapter 11: Labor Rising: Unions in the Great Depression 175
Part IV: Fixing Things.......... 193
Chapter 12: A Tale of Two Presidents 195
Chapter 13: Roosevelt's New Deal 211
Chapter 14: Lessons Learned from the Great Depression 229
Part V: The Part of Tens 239
Chapter 15: Ten Good Movies Made in or
about the Great Depression 241
Chapter 16: Ten Things Invented or Popularized
in the Great Depression 245
Chapter 17: Ten Not-So-Depressing Things about
the Great Depression 249
Appendix: For Further Reading 255
Index 257
DropBooks
Table of Contents
DropBooks
Introduction.. .............................................. ....... 1
About This Book 2
Conventions Used in This Book 2
What You're Not to Read 3
Foolish Assumptions 3
How This Book Is Organized 3
Part I: Heading into a Mess 4
Part II: Getting Depressed 4
Part III: Living Through the Great Depression 5
Part IV: Fixing Things 5
Part V: The Part of Tens 5
Icons Used in This Book 5
Where to Go from Here 6
Part h Heading into a Mess.. 7
Chapter 1: It Was a Dark and Stormy Decade 9
Before the Beginning 9
Defining the Great Depression 10
Tracking events that led to the Great Depression .... 10
Sharing the Suffering 11
Going hungry and jobless as the banks collapse 11
Looking for help, and striving to help themselves.... 11
Suffering on the farm 12
Exporting our economic woes 12
Coping with Hard Times 13
Looking for better times down the road 13
Making noise with speeches, rallies,
and machine guns 14
Putting smiles on depressed faces 15
Developing organized labor 15
Finding a Way Out of the Great Depression 15
Swapping leaders mid-Depression 16
Curing the Great Depression with a
New Deal's worth of alphabet soup 16
Lessons and Legacies from the Great Depression 16
Lessons from the Great Depression For Dummies
Chapter 2: Economic Basics: You Say
"Depression," I Say "Broke" 17
/"N /"liArfe^on: A Recession on Steroids 17
I » Refining a recession 18
Sinking into a depression 18
Considering Economic Cures 19
Setting fiscal policies 19
Adjusting monetary policy: The Fed 20
Sizing Up the Stock Market's Role in a Downturn 21
Buying on margin 21
Making pooled investments 22
Factoring in Inflation and Deflation 23
The gold standard: Keeping inflation in check 23
Battling deflation 24
Chapter 3: Prelude to Disaster:
The Economy Prior to 1929 25
Riding the Economic Cycle 25
Some hard times before World War 1 26
Not much fun after World War 1 30
Sharing the Good Times with "Silent Cal" 32
Driving to the good life 33
A dollar down, a dollar a week: Living on credit 34
Creating demand for needless things 34
Getting Richer, or Staying Poor 35
Feeling downtrodden on the farm 36
Immigrants and African Americans:
Getting by at the bottom of the heap 38
Crashing with the Market 38
Buying into the market on credit 39
Getting gored by the bulls 39
Lessons Learned 41
It's easy to borrow, hard to repay 41
The stock market can go down 42
Part 11: Getting Depressed 43
Chapter 4: Going Bust: A Depression Is Born 45
Analyzing What Happened 45
Putting a Happy Face on a Gloomy Economy 47
Banking in Ruins 48
Reacting to the crash 49
Digging a deeper hole 49
Taking a great bank holiday 50
Breathing new life into the banks 51
Table of Contents
XI
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Becoming Jobless, Homeless, and Hungry 53
Watching jobs disappear 53
Moving to the streets 56
ng hungry 57
on Washington 60
Lessons Learned 61
Safeguarding savings: The FDIC 61
Reacting to economic downturns 62
Chapter 5: Coming Face to Face with Hard Times 65
Looking for Relief 65
Trying to help at the local level 66
Getting the feds involved . . . slowly 67
Swallowing pride to keep from starving 70
Changing with the Times 71
Tapping the entrepreneurial spirit 71
Making do with what you had 72
Taking a Toll on the American Family 73
Eroding men's self-worth 74
Hitting children the hardest 76
Scraping By at the Bottom of the Barrel 77
African Americans 77
Latinos 80
Native Americans 81
Lessons Learned 82
Weaving a social services safety net 82
Paying women what they're worth 83
Chapter 6: Troubles on the Farm 85
Farmers' Pre-Depression Depression 85
Getting a boost from weather and WWI 86
Watching demand and prices fall 87
Sharecroppers: The worst of the worst-off 88
Fumbling federal efforts to help 89
Fighting-Mad Farmers 90
Calling for a "holiday" 90
Facing the farmers in the road 91
Holding "penny" auctions 92
Catching Washington's attention 92
Paying Farmers Not to Farm 94
Pumping money into the economy 95
Finding a glitch and a flaw in the AAA 96
Revamping the AAA 97
Drought and Dust 98
Roosevelt, the rainmaker 99
A plague of grasshoppers 99
Mountains of dust 100
^ff Lessons from the Great Depression For Dummies
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Unm tho D
Lessons Learned 103
The farmer and the Feds 103
Feeding the poor 104
isery Loves Company:
How the Rest of the World Fared 107
Tallying the Costs of War 107
Paying reparations — or not 108
Trying temporary fixes: The Dawes
and Young plans 109
Making things worse with tariffs 1 10
Kicking the Gold Habit Ill
The war changes the rules 1 12
Goodbye, gold standard 113
A "bombshell message" 113
Looking at the Great Depression around the World 1 14
Canada 114
Mexico 115
Great Britain 116
France 117
Latin America 117
Africa 118
Linking Depression and Despotism 119
Military Japan 119
Mussolini's Italy 120
Hitler's Germany 120
Stalin's Soviet Union 122
Lessons Learned 123
The World Bank 123
The International Monetary Fund and
the end of the gold standard 124
Part 111: Living Through the Great Depression... 125
Chapter 8: On the Road 127
The "Wandering Population" 127
Riding the rails 128
"Waiting for nothing" 129
Being run off or arrested 129
The "Boxcar Children" 131
Locking up the schools 132
Giving boys a purpose: The CCC 132
Leaving their mark on the land 133
The Real-Life Grapes of Wrath 134
Telling the rest of the story 135
Contributing to the great migration: The AAA 135
Heading west 136
Table of Contents
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Life in California 137
Fitting in where they weren't wanted 138
Feeling the sting of discrimination 139
ting down roots 140
earned 141
Working to serve 141
Losing ground in the fields 142
Chapter 9: Demagogues and Desperadoes 145
The Soapbox Supermen 145
Francis E. Townsend 146
Charles E. Coughlin 147
Huey P. Long 147
Heading for a showdown with FDR 148
Fascists, Nazis, and Reds 149
Hatching the "Business Plot" 150
Defending the wealthy 150
Trying to get a footing as communists 151
Shilling for Der Fiihrer 152
Sticking with the Constitution 152
Robin Hoods and Dirty Rats 153
Thirsting for justice 155
Emphasizing the good guys 156
Lessons Learned 158
Chapter 10: Having Fun in Spite of It All 159
More Time to Play 159
Cutting down the workweek 160
Finding uses for free time 160
When Radio Was King 160
Influencing America on the public airwaves 161
Politicking over the air 163
Trading Real Life for Reel Life 164
Filling the seats 165
Keeping it clean 166
Producing the stuff of dreams 167
More Fun for the Eyes and Ears 168
Reading comic strips and their offspring 168
Swinging to a new sound 170
Drinking and Driving 171
Bringing back legal booze 171
Touring America 172
Lessons Learned 173
Changing how we spend leisure time 173
Spending time in traffic 174
jfftf Lessons from the Great Depression For Dummies
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Chapter 11: Labor Rising: Unions in
the Great Depression 175
zed Labor 175
ing ground in good and bad times 176
Exposing management's dark side 177
Sinking with the economy 178
A New Deal for Workers 178
Section 7(a): Supporting the right to unionize 179
The Wagner Act: Giving unions real strength 180
The Fair Labor Standards Act:
Raising wages, cutting hours 181
Forming New Kinds of Unions 182
Setting up the CIO 183
Fighting in the ranks 184
Considering the workers no one wanted 185
Strikes and Fights 186
Shutting down cities 186
Sitting down on the job 188
Beating "Big Steel" 189
Losing to "Little Steel" 189
Growing tired of labor strife 190
Lessons Learned 190
Trying to keep pace with the minimum wage 191
Striving to stay relevant in unions 192
Part IV: Fixing Things 193
Chapter 12: A Tale of Two Presidents 195
"The Great Humanitarian" 195
Growing up 196
Striking gold 196
Saving lives 197
Serving presidents 198
Serving as president 198
A good man, a bad politician 199
The New Dealer 200
Growing up 201
Starting his political career 201
Losing the use of his legs 202
Becoming governor 202
Running for president 203
Easy Campaign, Hard Transition 204
Running to the right 204
Campaigning for a lost cause 205
Winning the White House 205
Handing off the Great Depression 206
Table of Contents
Avoiding an assassin's bullet 207
Taking over 208
— ^ Leesons Learned 209
J \ JT\ f\ f \ L( Ringing the wait with the Twentieth Amendment ... 209
I— J I \J YJ I—/ \J \J IXlSiding off the office from Bush to Obama 210
Chapter 13: Roosevelt's New Deal 211
Starting Fast: The First 100 Days 211
An alphabet soup of achievements 213
"The most far-reaching legislation ever enacted" ... 216
No one likes relief: The Civil Works Administration ... 218
Starting the Second New Deal 219
Generating jobs through the Works Progress
Administration 220
Establishing Social Security 221
Feuding with the Supreme Court 223
Assessing the New Deal 224
Lessons Learned 225
Paying for Social Security 225
Closing the New Deal's health gap 227
Chapter 14: Lessons Learned from
the Great Depression 229
An Overview of the Great Depression 229
Creating an economic disaster 230
Dealing with the consequences 231
Recessions after the Great Depression 232
Debating "the Great Moderation" 232
Looking at post-war recessions 233
How Things Have Changed since 1929 235
The Legacy of the Great Depression 237
Part V: The Part of Tens 239
Chapter 15: Ten Good Movies Made in
or about the Great Depression 241
The Public Enemy (1931) 241
I Am a Fugitive from a Chain Gang (1932) 241
Gabriel Over the White House (1933) 242
Gold Diggers of 1933 (1933) 242
Dead End (1937) 243
The Grapes of Wrath (1940) 243
They Shoot Horses, Don 't They? (1969) 243
Sounder (1972) 244
Bound for Glory (1976) 244
Cinderella Man (2005) 244
^(// Lessons from the Great Depression For Dummies
Chapter 16: Ten Things Invented or Popularized
in the Great Depression
DropBoote
ad (1930) 245
(1930) 245
Scotch Tape (1930) 246
Alka-Seltzer (1931) 246
Fritos (1932) 247
Toll House Cookies (1933) 247
The Laundromat (1934) 247
Tampax (1936) 248
Nylon Bristle Toothbrush (1938) 248
Rudolph the Red-Nosed Reindeer (1939) 248
Chapter 17: Ten Not-So-Depressing Things
about the Great Depression 249
Marx Brothers Movies 249
Shirley Temple 249
The Golden Gate Bridge 250
The Wizard of Oz Movie 250
"Wrong Way" Corrigan 251
The Debut of Bugs Bunny 251
Baseball's All-Star Game 252
The Introduction of Muzak 253
The World's — and Other — Fairs 253
Superman 254
Appendix: for Further Reading........................ 255
Index. 257
„ , Introduction
DropBooks
J % lot long after the U.S. stock market crashed in late October
m w 1929, a reporter for The Saturday Evening Post asked the
esteemed British economist John Maynard Keynes if he could think
of another period in history that was as financially bleak.
"Yes," Keynes replied. "It was called the Dark Ages, and it lasted
400 years."
The Great Depression didn't last quite that long. It is generally
considered to have begun in late 1929 and ended in 1940 and 1941,
when the United States stepped up military production as the
threat of war loomed.
But the influences of the period — from the existence of the Social
Security system to federal government price supports of U.S. farm
products to the insurance on bank accounts — are felt in nearly
every aspect of contemporary life in the United States.
In fact, virtually every economic downturn since the 1930s has
inspired comparisons to that earlier period and raised questions
about what happened just before and during the Great Depression.
In the last 90 days of 2008, for example, the term "Great
Depression" appeared 270 times in The New York Times alone,
most often in stories about the state of the 2008 economy.
In most cases, making such comparisons is a legitimate response
because it's highly probable that no other period has had as much
impact on the way government, business, labor, and the American
people interact with their economy.
The Great Depression has also had personal impacts on many
modern American families because of the wrenching effects it had
on their parents, grandparents, or great-grandparents.
For example, I'm a Californian because my mother's parents moved
in the 1930s from a dust-choked farm near Stillwater, Oklahoma, to
the uncertain promise of a better life in Monterey, California. Tens
of millions of Americans can relate similar stories about how the
Great Depression affected their families.
Lessons from the Great Depression For Dummies
About This Book
DropBo&te
ression has long been a favorite topic for historians
ok writers. Except for the Civil War, probably no
period in U.S. history has been written about more than the era
of Black Thursday, the New Deal, FDR, John Dillinger, bread lines,
and the Dust Bowl. (Don't worry if some of these terms aren't
familiar — I explain them all in this book.) But Lessons from the
Great Depression For Dummies takes a little different approach than
other books about the era.
Here are my goals in this book:
To give you a solid grounding in just what happened during
the Great Depression, in the rest of the world as well as in the
United States.
f To look at how the experiences of the 1930s stack up against
the economic conditions of the 21st century.
v0 To assess just what has — and hasn't — been learned from
the events of eight decades ago.
To maybe spark a chuckle or an "I didn't know that!" through
an anecdote or quirky fact about the people and the events of
the period.
This book is not a textbook. If you're looking for in-depth dissections
of Keynesian economics or exhaustive explanations of the
environmental effects of the Tennessee Valley Authority, you're
likely to be disappointed.
It's also not meant to be a polemic for any particular political
perspective. However, while I've tried hard to be objective, it's
possible my personal biases may have snuck in from time to time.
If they have, I apologize. Just ignore them. I do.
Conventions Used in This Book
To help you navigate through the book, I've used the following
conventions:
Italics are used both to emphasize a word and to highlight a
new word or phrase that is being defined.
Bold highlights the keywords in a bulleted list.
Introduction
What \lou're Not to Read
in this book you're going to see blocks of text in
xes (called sidebars). They contain quotations,
interesting people from the period, anecdotes
about certain events, or the origins of customs or other aspects of
American life.
DropBacte
Think of them as side trips off the highway. You can skip right by
them and stick with the main text, or you can stop for a minute
before resuming the journey. You could even save them until
you've read all of the main text and then go back to them. It's like
two books for the price of one!
Foolish Assumptions
We all know that when you assume, you make an ass of u and me.
(Well, it was funny in sixth grade.)
Notwithstanding that admonition, I'm making a few assumptions
about why you picked up this book:
v0 You know little to nothing about the Great Depression, and
you want to find out about it.
You know something about the Great Depression, and you
would like to know more.
You know a lot about the Great Depression, and you want to
see just how big an ignoramus the author is.
Seriously, the only real assumptions I make are that you're inter-
ested in U.S. history or you're concerned about what's happening
with the current economy and you want to know how it contrasts
and compares with the 1930s. If either or both assumptions are
true, I think you have picked up the right book.
HoW This Book Is Organized
This book is set up so you don't have to start on the first page and
go straight through to the last. If you scan the table of contents
and Chapter 10's title jumps out and grabs you by the throat, feel
free to read it first. You can always go back to Chapter 1 later.
Lessons from the Great Depression For Dummies
Basically, the book is organized along a three-tier structure. The
parts are collections of chapters grouped more or less around a
central theme. Next are the chapters themselves, which contain
| ]ff \ 1T\ <S5jpJ?c\sK^a^pic or time period. Finally, the headings and
I V/ l—J \$k>\mJin^3^knote parts of the chapters that home in on specific
subjects.
Oh, and starting with Chapter 3, there's a section at the end of
each chapter called "Lessons Learned." This section looks at how
events covered in the chapter relate to contemporary situations,
and whether we do a better job of handling them now than we did
then.
Here's a look at what's in the five parts:
Part 1: Heading into a Mess
The chapters in this part are sort of like the appetizer course.
There's an overview of the book's contents (think of it as an
annotated menu). Then there's a collection of explanations of
economic terms and concepts that will make understanding the
Great Depression easier.
This part is topped off by some pretty detailed background on
what happened before the Great Depression that helped bring it
about, from making too many things to having too little money to
buy them.
Part 11: Getting Depressed
This part covers just how hard the Great Depression's hard times
were — and who they were hard on, particularly in the three years
after the stock market crash in late 1929.
It explores the events that helped trigger the Great Depression;
how it changed Americans' relationships with each other; how
people coped with virtually no help from the government; the
plight of rural Americans (who were doubly hit by the economy
and Mother Nature); and what was happening in the rest of the
world.
Introduction
Part 111: LiVlnq Through
|^ rarfill lookTat the mass exo
ssion
exodus of rural Americans from the
drought-stricken Great Plains to the West. It also houses
collections both of characters that made their livings with guns
and of characters that made their livings with their big mouths.
I explain how Americans tried to make the best of the gloomy
economic times by escaping to radio shows or the movies, as well
as how organized labor got stronger during the era.
Part IV: FMnq Things
This part focuses on the two presidents who played very different
roles in the Great Depression: Herbert Hoover, the accomplished
humanitarian who became the Great Goat; and Franklin D.
Roosevelt, the polio-stricken patrician who simultaneously
became the best-loved and most-hated man of the era. I examine
the presidential campaign of 1932 and the transition between
the two men, as well as Roosevelt's New Deal cures for the Great
Depression — how well they worked and their lasting impacts. I
conclude this part with a summary of what's different and what's
similar about the economies of the 1930s and the 2000s.
Part V: The Part of Tens
Ah, the ubiquitous For Dummies Part of Tens. This particular
collection includes a look at ten good movies set in the Great
Depression, ten things invented or popularized in the period, and
ten things about the 1930s that weren't so depressing after all.
Icons Used in This Book
Those little round pictures in the left-hand margins are designed to
give you a heads-up as you are meandering or racing through the
book.
Lessons from the Great Depression For Dummies
This icon indicates a quote from an article, speech, or document.
i
►icon, you're looking at the origin of a law, custom, or
other aspect of life.
This icon alerts you to a fact or idea that you may want to stash
away on your brain's hard drive.
If you see this icon, there's a factoid about contemporary eco-
nomic conditions lurking about, usually juxtaposed with how
things were in the 1930s.
Where to Go from Here
You can go anywhere you want from here. You can start with
Chapter 1 or skip around the book. That's how For Dummies books
are built. Me, I almost always go straight to "The Part of Tens" and
then head back to Chapter 1.
But heck, it's your book. Enjoy.
DropBooks Parti
Heading into a Mess
The 5th Wave
By Rich Tennant
So, hovr £ast can \
this thing go? J
DropBooks
In this part . . .
7 he Great Depression wasn't nearly as simple an
historical period as some people make it out to be. It
wasn't just a case of the stock market going down and
everyone in the United States going broke.
In this part, you get an overview of the period to whet
your appetite for other parts of the book. And before you
dine on what comes next, this part gives you a menu of
economic terms and concepts that can be useful in
understanding the era.
I top off this part with a summary of the country's
economic rough times prior to the Great Depression and a
fairly detailed look at the decade just before things really
got rough.
Chapter 1
a Dark and
Stormy Decade
In This Chapter
Getting into a depression
Dragging nearly everyone down
Coping with life on the economy's edges
Trying to make things better
1
m n August 1928, a few months before winning the U.S. presidency,
«( Republican candidate Herbert Hoover boasted that "we in
America are nearer to the final triumph over poverty than ever
before in the history of any land."
Boy, was he wrong.
Less than a year after Hoover assumed office, the United States
was plunged into the deepest and longest economic recession in
its history. It wasn't called the Great Depression for nothing.
This book tells the story of this period in U.S. history (from the
end of 1929 to the country's entry into World War II in late 1941)
by looking at the different elements that gave the era its shape, as
well as some of the lessons and legacies that the era left us. This
chapter tells you what those elements are and where to find out
more about them.
Before the Beginning
Every era has a beginning and an end (although historians often
disagree about just when they occur). But nothing, not even
history, happens independently of everything else.
Part I: Heading into a Mess
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The first part of this book takes a look at events before the Great
Depression, to put the era in context and explain how those events
affectedj things after the depression began. It also provides some
)f terms and concepts that may prove helpful in
the era.
Defining the Great Depression
While the Great Depression was a political, social, and cultural
event, as well as a financial calamity, its roots were economic. To
have some understanding of what happened, you need to have a
grasp of basic economic terms and processes.
On your to-know list: the difference between a depression and a
recession; the methods the federal government uses in fighting
economic downturns; how the Federal Reserve System works;
what role the stock market plays in a recession; and how inflation
and deflation factor into recessionary economics. I explain all
these terms and concepts in Chapter 2.
Tracking events that ted
to the Great Depression
^be/? The Great Depression wasn't the first time that the U.S. economy
hit the skids. In fact, recessions seem to come along with discon-
certing regularity. But they do vary in their causes (foreign wars,
broken-down railroads, even presidents who don't like banks),
their duration, and their lasting impact.
In the period between the end of World War I and the onset of
the Great Depression, the United States for the most part enjoyed
economic good times under a string of Republican presidents who
thought that what was good for big business was good for the
rest of the country. There were new or improved products to buy
(especially cars), lots of advertising to help talk people into buying
them, and easily obtained credit with which to buy them.
But behind the facade of fiscal fun lurked indications that the U.S.
economy was living on borrowed time. Large groups of Americans —
farmers, minorities, and low-income workers — were not sharing
in the good times. The stock market was dangerously overheated,
and eventually it melted down.
I offer details of the times before the Great Depression, along
with a look at modern stock market crash safeguards (as well as
modern credit risks) in Chapter 3.
Chapter 1: It Was a Dark and Stormy Decade / /
Sharing the Suffering
DropBcffiks
y few Americans lost money directly when the U.S.
rashed in October 1929, the pain of the general
collapse of the economy that followed was felt by almost everyone.
Part II of this book looks at the crushing blows suffered by various
groups of people, from bankers to farmers.
Going hungry and jobless
as the banks collapse
Trying to figure out why the Great Depression occurred has
sparked debate among economists and historians for decades.
It's a safe bet there was a combination of reasons for it, from farm
failures to too many poor people.
jjABE/? Whatever its causes, the Great Depression's consequences were
devastating. While government officials and business leaders
initially tried to gloss things over, the U.S. banking system teetered
on the edge of collapse. It took a change of administrations and an
extended "bank holiday" to pull the banking industry back from
the edge.
Unemployment soared, a swelling number of homeless people
seemed to occupy every street corner, children went hungry, and
World War I veterans marched on Washington, D.C.
To find out more, read Chapter 4, which also looks at the federal
program that protects most bank deposits and the three-pronged
approach the government has taken since World War II to prevent
recessions from becoming depressions.
Looking for help, and striving
to help themselves
The Great Depression damaged not only Americans' wallets and
purses but also their pride. They had been used to fending for
themselves, their families, and their friends. But many of them got
into such deep holes that to get out required help on a much larger
scale.
12 Part I: Heading into a Mess
The failure to help themselves did not result from lack of trying.
People did whatever they could to make money, but most often
they fel| short. Local governments and private charities did what
t it took a change of presidents — and a lot of grit-
leIr>eWi — for people to get and take meaningful help from
the federal government.
In the meantime, people tried to create jobs and make do with what
they had. The result was often a severe blow to their self-esteem and
a source of stress in relationships. And hurting the most, as usual,
were the nation's minority groups.
Details on all these topics are in Chapter 5, where you'll also find
information on the country's 21st-century social services safety
net, and how efforts to pay women what they are worth have fared
since World War II.
Suffering on the farm
Times were tough among U.S. farmers even before the Great
Depression started. They were in some ways victims of their own
success: Overproduction of crops led to low prices and small or no
profits.
Farmers got little help from the federal government until Franklin
D. Roosevelt was elected president in late 1932. While they were
waiting, some farmers took things into their own hands by staging
mini-revolutions .
Then the Roosevelt administration came up with a plan to help
farmers, in large part by paying them not to farm so much. But
the federal government couldn't do much about the drought, dust
storms, and insect invasions that plagued the agriculture industry
during the Great Depression.
You can find out lots more in Chapter 6, along with how
U.S. farmers are faring in the 21st century.
Exporting our economic Woes
The United States wasn't the only country whose economy was
hurting as the 1930s began. In fact, most of the world was feeling
financial pain by the end of 1930.
Chapter 1: It Was a Dark and Stormy Decade / 3
Chapter 7 looks at the international state of things after World
War I, including efforts to make things better and efforts that only
made things worse.
tftaf (lhapwr, I explain the role the gold standard played in
the world economy, offer a country-by-country view of the Great
Depression, and describe how nations that were under the thrall of
dictatorships fared. I also introduce two international organizations
working in the 21st century to foster economic cooperation among
nations.
Copinq With Hard Times
The Great Depression was populated with a lot of disparate
characters, from the "boxcar children" (kids who hit the road
looking for a future) to murderous bank robbers to Shakespeare-
spouting labor leaders. Part III of the book covers these characters,
as well as discussing migrant farm workers, historic labor strikes,
and more.
Looking for better times
dovOti the road
While most Americans stayed close to home during the Great
Depression, a sizeable number packed up what they had and hit
the road. Chapter 8 describes the three groups in which most of
those wanderers fell: men looking for work; young people looking for
somewhere they wouldn't be a burden and would have a chance
at a decent life; and families headed for the "promised land" of
California, only to find the promise was mostly false. The desperation
of these people is caught in the famous portrait of a migrant
woman with her children, shown in Figure 1-1.
Chapter 8 also looks at an ambitious federal program that put
Depression-era young men to work improving the national parks
and wild lands: the Civilian Conservation Corps. And I discuss the
plight of migrant farm workers, and how they are (and aren't)
protected differently today.
Part I: Heading into a Mess
Figure 1-1: Migrant mother Florence Thompson with three of her seven children
at a farm workers' camp in Nipomo, California.
Making noise With speeches,
rallies, and machine guns
Unlike the citizens of some other countries, Americans never rose
up in huge numbers to protest the state of things in the Great
Depression (unless you count the election of Franklin D. Roosevelt
in 1932 and 1936 as a protest).
That doesn't mean, however, that there weren't individuals with
big visions, big mouths, and substantial followings. Chapter 9
looks at some of these characters, such as Louisiana Governor and
Senator Huey Long and Roman Catholic priest/radio commentator
Charles E. Coughlin.
Chapter 9 also covers efforts by communists and Nazis to gain a
foothold in the U.S. political scene, as well as the fascination with
criminals (both on the movie screen and in real life) during the era
and the correlation between recessions and crime.
Chapter 1: It Was a Dark and Stormy Decade / §
Putting smites on depressed faces
DropB$®te'
Great Depressic
ling qualities of the American character is a refusal
st because things aren't going well. Even in the
Depression, Americans found ways to have fun.
As Chapter 10 reveals, the most popular ways to fill an increasing
amount of leisure time were to listen to the radio and go to the
movies. But there were also comic strips, comic books, and pulp
magazines to peruse; a new kind of music to listen to; legal liquor
to drink; and better cars to drive.
betietopinq organized tabor
Many sectors of the U.S. economy came out of the Great
Depression better than they went into it, but perhaps none more
so than organized labor.
Of course there were downs as well as ups. As Chapter 11 shows,
it took thousands of strikes, scores of deaths, and three new major
federal laws for labor to secure a significant role in U.S. politics
and economic policy.
Chapter 1 1 also examines the history of the federal minimum wage
since its inception in the Great Depression, and the role of labor in
the first decade of the 21st century.
Finding a Wat} Out of
the Great Repression
It took years for the United States to get into the Great Depression
and years to get out of it. Part IV of this book examines the two
men who bore the most responsibility for turning the country
around in the era: President Herbert Hoover and President
Franklin D. Roosevelt.
This part also looks in detail at the ambitious agenda of Roosevelt
during his time at the helm, and what the effects of that agenda
were on later generations. It ends with a look at what can be
learned from the Great Depression and applied to other economic
crises in U.S. history, particularly in the 21st century.
1 () Part I: Heading into a Mess
Swapping leaders mid-Depression
DropB«
approaches
r and Franklin Roosevelt had very different back-
rhaps it's not surprising that they took different
approachesTb dealing with the Great Depression. How well they
succeeded, or how badly they failed, is still a source of debate
among historians and economists.
Chapter 12 delves into what life experiences each man brought to
the White House and how the two approached finding cures for the
country's economic illnesses. I also look at their 1932 presidential
race and how they handled the handing-off of power from one to
the other.
Curing the Great Depression With a
NeW beat's Worth o f alphabet soup
Outside of a war, it would be hard to think of another period in U.S.
history when so much federal government effort went into solving
a problem as during the Great Depression.
The era was a great period for acronyms. There were federal
programs from AAA (Agricultural Adjustment Act) to WPA (Works
Progress Administration). Heck, even the president had one: FDR.
Roosevelt's efforts were called the New Deal, even though most
historians would say that there were really two New Deals.
A lot of historians would also say that the New Deal(s) had a lot more
lasting impact on the role of the federal government in American
life than it had an immediate impact on the Great Depression. Read
Chapter 13 and decide for yourself. And then read a summary of the
status of Social Security and Medicare in the early 21st century.
Lessons and Legacies from
the Great Repression
Economically speaking, the worst thing that ever happened to the
United States was the Great Depression. But it wasn't the last bad
thing to happen to the U.S. economy.
In Chapter 14, 1 offer a summary of what helped to trigger the Great
Depression and what came about as a result. I also review the 1 1
recessions that have come along since World War II and look at the
differences between the mess that started in 1929 and the one that
began in late 2007.
Chapter 2
Dropl8fifa Basics: You Say
"Depression," I Say "Broke"
In This Chapter
Comparing a recession to a depression
> Looking into the government's economic toolbox
Taking stock of the market
Explaining inflation and deflation
1
m f you already know the difference between general equilibrium
«5 analysis and multilateral trade conventions, go ahead and skip
this chapter because you clearly have a firm grasp of economic
theory.
If you're like me, however, you have a tough time figuring out if
"three for a dollar" is better than "40 cents each." If that's the case,
stick around and peruse some basic economic terms and concepts
that will give you a better grasp of what happened in the Great
Depression and how things have changed since then.
depression: A Recession
on Steroids
There's an old economists' joke (told mainly by old economists)
that a recession is when your neighbor loses his job and a
depression is when you lose yours.
Actually, that's pretty accurate because the major difference
between the two is that a depression is more severe than a
recession, and thus a bigger economic calamity. Think of a
depression as a recession on steroids.
/$ Part I: Heading into a Mess
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Defining a recession
^cession? Depends on whom you ask. The layman's
[d4hii(|fl^?ttaat a recession occurs when a country's gross
'omestic product (GDP) — the value of all the reported goods and
services produced by a country — goes down for two or more
consecutive quarters (which means for six months or more).
But the "two quarters or more of declining GDP" definition of a
recession is much too simple for many economists. In fact, the
official decision as to whether a recession is occurring is left to a
private, nonprofit, nonpartisan organization called the National
Bureau of Economic Research (NBER). Founded in 1920, the
NBER uses data from more than 1,000 university professors and
researchers who look at factors such as manufacturing sales,
personal income levels, and unemployment rates.
Of course, gathering all that data and analyzing it takes a while, so
recessions can be months old before the NBER gets around to
telling us one is occurring (or has already been here and gone).
^jjjftBE^ However they're defined, recessions are pretty common, and most
<&/j§N economists consider them a natural part of the business cycle. For
( UM J example, the NBER says the United States had recessions in the
V^J/ first half of 1980; from July 1981 until November 1982; from July
1990 until March 1991; from March to November 2001, and from
December 2007 through at least the first quarter of 2009 (the time
of this writing).
Sinking into a depression
A recession becomes a depression when things get so bad that a
country's GDP drops by more than 10 percent. The last time that
happened in the United States, we called it the Great Depression —
and not because it was a lot of fun.
To get technical, the Great Depression was really two depressions:
V From 1929 to 1933, the GDP of the United States plunged 27
percent, or 10 times as much as during any recession since
World War II.
V From 1937 to 1938, after a bit of a rally, the GDP dropped 18
percent.
Compare those numbers to the 1.5 percent decline in the GDP
during the 1990-1991 recession or the 0.6 percent it went down
in the 2001 recession, and you have some idea how severe the
situation was in the 1930s.
_ Chapter 2: Economic Basics: You Say "Depression," I Say "Broke
bling over definitions
"Let it snow on the record that when the American people cried out for economic
help, Jimmy Carter took refuge behind a dictionary. Well, if it's a definition he wants,
I'll give him one. A recession is when your neighbor loses his job. A depression is
when you lose yours. And recovery is when Jimmy Carter loses his."
— 1980 Republican presidential candidate Ronald Reagan, responding to criti-
cism from opponent Carter that Reagan had misused the term "depression."
To be clear, a depression can still happen in modern times. In the
1990s, Finland's economy went into a depression. The Finnish GDP
dropped 1 1 percent after the Soviet Union fell apart and Finland
lost its best market for exporting its goods. (And since we've gone
international for a minute, a global recession is said to occur when
global economic growth drops to less than 3 percent.)
Considering Economic Cures
Ordinary recession symptoms are, well, depressing. People buy
less stuff because they feel less confident about making money in
the future. Factories make less stuff because people are buying less.
It can be harder to get credit. Unemployment rises, and the stock
market sags. (But as I explain in Part II, the Great Depression's symp-
toms made an ordinary recession look like a day at the beach.)
Since one of the purposes of having a federal government is to
have someone to blame when things go wrong, it seems only fair
that we look at methods the federal government can use to try to
pull the economy out of a recession.
Setting fiscal policies
Fiscal policies are basically the guidelines the government follows
to collect and spend our money. To combat recession, it can take
the following steps:
Cut taxes so people and businesses keep more cash for
spending on goods and services.
v0 Increase spending on government projects to spur
employment.
Widen "safety net" programs such as unemployment insurance.
20 Part I: Heading into a Mess
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Adjusting monetary policy: The Fed
^ites pretty much wandered through its first 87 years
LasJJ^caiinfc-Qrithout a functional national banking system. The
irstBank ofthe United States (1791-1811) and the Second Bank
of the United States (1816-1836) were the only sources that issued
and backed official U.S. currency. All other banks either operated
under state charters or were strictly private enterprises. Each
bank issued its own notes, which made for a chaotic system.
In 1863, Congress took the first step toward standardizing banking
by passing the National Bank Act. The act established rules for
lending practices and required minimum bank reserves. It also
slapped a 10 percent tax on state bank notes, which made it
financially impractical to use anything but federal currency.
In 1913, Congress created the Federal Reserve System, better
known as the Fed. The system is essentially the federal government's
bank. It oversees 12 Federal Reserve banks located around the
country, issues currency, regulates banking operations, and
oversees consumer credit rights.
The Fed is in charge of monetary policy, which means it helps
regulate the economy by manipulating the money supply. In a
recession, the Fed can boost economic growth by lowering the
amount banks have to keep in reserves, which puts more money in
circulation. It can directly pump more money into the economy.
The Fed can also lower the federal funds rate (the rate banks
charge each other for short-term loans), which means that they
can then charge lower interest rates on loans they make to their
customers. In the recession that began in late 2007, for example,
the Fed cut the federal funds rate nine times in 15 months. It
dropped from 4.75 percent to between .25 percent and zero, the
lowest in its history.
In 2008, the Fed broke out other tools at its disposal to try to
open up the country's credit market. Those tools included buying
Treasury bonds to prop up investment in the federal government
and buying up loans that private entities had made so they could
make new loans without being overburdened with debt.
But keep in mind that at the onset of the Great Depression, the Fed
was only 16 years old, and like most teenagers, it didn't always
make the best decisions. Moreover, most small banks weren't
members of the system, mainly because the Fed snubbed them in
favor of big commercial institutions. Both factors turned out to be
disastrous, as I explain in Chapter 4.
Chapter 2: Economic Basics: You Say "Depression," I Say "Broke" 2 /
Sizing Up the Stock Market's
D r 0 |2©D0 k§ou/nturn
The maxim that it takes money to make money has a corollary:
Without money, you can't make money. One exception to the
corollary is the stock market. If you're willing to gamble, you can
make money by borrowing from someone else. But, of course, you
can lose money the same way — and lots of it. In this section, I
explore the role the stock market can play in exacerbating an
economic downturn.
Buying on margin
Let's say you want to buy 1,000 shares of Acme Widget Corp.,
which is trading at $10 a share. You need $10,000, but you have
only $5,000. No problem: You buy on margin.
What that means is you borrow the other $5,000 from your
stockbroker. Now let's say Acme goes up in price by a dollar a
share. Now your 1,000 shares are worth $1 1,000. You pay back the
$5,000 you borrowed, and pocket your original $5,000 plus all of
the $1,000 in increased value (minus any broker fees). You have
thus profited on twice as many shares as you could have bought
on your own.
jtiBER Of course the reverse is true as well. If the price goes down, the
broker may ask you to put some more money into your account as
collateral for the amount you borrowed. That's called a margin call,
and it sort of takes the fun out of buying on margin.
In the 1920s, it was common for investors to leverage as much as
90 percent of a stock purchase. Broker loans rose from $2.5 billion
in 1926 to $8.5 billion in October 1929. Brokers charged interest
rates of as much as 20 percent. No one cared because stock prices
were going up so fast that everyone was making money.
But what was making the market go up so fast was the huge
amount of money people were in effect borrowing by buying on
margin. They used that money to bid up the price of stocks far out
of proportion to the real value of the company issuing the stock.
The Radio Corporation of America (RCA), for example, went from
$85 to $420 in 1928 despite the fact that it had never paid a dividend.
When the overheated market dropped and margin calls were
placed in droves, few people could repay what they had borrowed.
"Buying on margin" became a recipe for disaster (see Chapter 3).
22 Part ': Heading into a Mess
Samuel Insull
to Thomas Edison and ended up face down in a Paris
suDway. in Deiween, aamuel Insull was a hero of U.S. capitalism — and a villain of
the Great Depression.
Insull was born in London in 1859. At 21, he came to New York and became Edison's
private secretary and right-hand man. After helping to launch what would become
the General Electric Co., Insull moved to Chicago and began building an electric
utility super company. By the end of the 1920s, Insull's electric empire stretched to
parts of 32 states and had 4 million customers.
To build his company, Insull sold low-priced stocks and bonds in various hold-
ing companies he controlled. More than a million people invested. But when the
stock market crashed in October 1929, the empire went belly up, and investors lost
more than $700 million. Subsequent investigations found an elaborate shell game
in which one Insull company would sell property to another Insull firm at a large
"profit." Then the property would be sold again to a third Insull firm. The profits,
however, existed only on paper.
Insull, who had been on the cover of Time magazine in 1929 as a captain of industry
and patron of the arts (he gave $20 million to build the Chicago Civic Opera House),
found himself on the cover of Time in 1934 as the defendant in a fraud and anti-
trust case. Although he was eventually acquitted, he was financially and personally
ruined, and he left the country. He died in a Paris subway station in 1938 after suf-
fering a heart attack. As a final indignity for a 1920s tycoon, his wallet was stolen
from his body.
Nowadays, the U.S. Securities and Exchange Commission, the
Federal Reserve Board, the stock exchanges, and the brokerage
firms themselves set rules on which stocks you can buy on margin,
what the minimum percentage is that investors must put up, and
when brokerages must make margin calls. In 2008, investors had
to put up a minimum of 50 percent of their own money to buy on
margin. That regulation discourages wild speculation and also helps
keep such speculation from artificially driving up stock prices.
Making pooled investments
If buying on margin seems a little risky, but you still want to invest
in a variety of stocks with just a little money, the solution may be
to pool your investment with a bunch of other small investors, give
it to a stock-picking professional, and sit back and wait for the
profits to roll in. That's basically what a mutual fund is. Mutual
funds have been around in their current, regulated form since
1940. In 2008, there were more than 8,000 of them in the United
States, with a total investment value of more than $12 trillion.
_ Chapter 2: Economic Basics: You Say "Depression," I Say "Broke
The 1920s versions were called investment trusts, but they were
actually more like pyramid schemes than mutual funds. An average
^ investor would buy shares (often on margin) in, say, Big Ed's
J }TC\ 1T\ /nWsTmrft^ust. Big Ed and other trusts would buy shares of an
I >/ k-/ I— ' Vrenjf iggerHnist, which would buy shares in an actual company.
The insidious part of the trusts — beside the incredible risk
factor — was that they tied up much of the nation's investment
capital. Instead of money going into businesses so that they could
expand, make new products, and hire more people, much of that
money just floated between trusts for speculation schemes.
Not everyone thought the investment trusts were a wonderful
system. President Herbert Hoover called the trust system "an orgy
of mad speculation" and noted that "there are crimes far worse
than murder for which men should be reviled and punished." But
most people shrugged off any criticism.
Factoring in Inflation
and deflation \
Inflation is basically a sustained rise in the prices of goods and
services. In the United States, the inflation rate is most generally
measured by something called the Consumer Price Index (CPI).
The CPI gauges what a collection of goods and services costs at
the moment, compared to what it cost at a fixed point in the past,
which is set at 100. For example, a CPI of 120 would mean the
goods and services that used to cost $100 now cost $120 — a 20
percent inflation rate.
Most economists agree that a low inflation is best. In the United
States, inflation rates stayed between 1.6 percent and 3.3 percent
from 1991 through 2008.
The qoid standard: Keeping
inflation in check
Since the cost of goods rose more than 1,000 percent in the last
60 years of the 20th century, it's hard to believe that for most
of history, inflation hardly existed. In the last third of the 19th
century, for example, prices on many things in the United States
dropped by nearly 50 percent as advances in transportation and
technology made making and moving products cheaper.
2iJ Part I: Heading into a Mess
DropB
Another reason inflation didn't pose much of a problem until the
1920s was that most countries (at least most Western countries)
I the gold standard. That term refers to a country tying its
:tly to the amount of gold it holds. The idea is that
go to the country's treasury and exchange paper
money for an equivalent amount in gold. It also means that countries
did business with each other by transferring gold rather than
currency. Because the supply of money was limited to the amount
of gold a country had on hand, prices and wages tended not to
increase dramatically.
The gold standard more or less worked until after World War I,
when some countries were so broke that they needed to print
more money than they had gold to support. That led to severe
inflation, as governments began churning out currency to help
people with rising prices on scarce commodities. In post-war
Germany, inflation got so bad that people literally had to carry
their cash in wheelbarrows so they could buy a loaf of bread.
(See Chapter 7 for a discussion of when and why the United States
broke away from the gold standard.)
Battling deflation
The opposite of inflation — known as deflation — can be even
more damaging to an economy. Deflation occurs when prices
persistently fall. This decline usually reflects a drop in demand
for goods and services. That situation causes oversupplies, which
leads to slowed production, which leads to rising unemployment,
which leads to even less demand.
Credit shrinks as a result of heightened fears that loans won't be
repaid. Consumers stop buying because they're afraid they'll need
the money even more in the future, or because they think prices
will be even lower tomorrow. And the downward spiral continues.
Because prices drop in a deflationary period, people who bought
things on credit — such as houses — find themselves in a bad way.
After the October 1929 stock market crash, for example, housing
prices dropped steeply. People found they owed more on their
homes than they were worth. As unemployment rose, families who
could no longer meet their mortgage payments found themselves
homeless, as well as jobless.
Chapter 3
to Disaster: The
Economy Prior to 1929
In This Chapter
► Tracking hard times prior to the Great Depression
Enjoying the good life with "Silent Cal"
Watching the rich get richer
Rushing to ruin on Wall Street
Lessons learned
7 he Great Depression didn't just get great overnight. It took
years of events — some related to each other, some not — to
give it form, and even then its enormity wasn't recognized right
away.
In this chapter, I look at the up-and-down cycles of the U.S. economy
prior to the Great Depression; the prosperity of the Roaring
Twenties (both real and imagined); the hidden chasm between the
rich and the poor that grew during that period; and the "everyone
should be rich" ethos that helped trigger the stock market crash at
the end of the decade.
Riding the Economic Cycle
Since the birth of the United States, its economy has tended to run in
cycles, with periods of somewhere between 10 and 20 years of
moderate-to-good times, interspersed with a few years of hard times.
Prior to the rise of capitalism, recessions were usually triggered
by a specific external event, such as war, crop failures, or natural
disasters. In capitalist economies, however, the causes of hard
times are often attributed to the forces of the marketplace: supply
and demand, consumer spending and saving, and the vagaries of
people's responses to economic events.
20 Part ': Heading into a Mess
Whatever the cause (and there is ceaseless debate among
economists about precisely what causes recessions), the advent
— ^ — ^ of hard times is often preceded by calamities in the banking
J }TC\ 1T\ #Tn\lrfs\-i/hQtock market. Hard times also often come hard on
I >J KS VtreV^B%fcOTer-speculation in land or securities. Creditors call in
loans, money supplies get tight, and businesses close.
"It has been a history of extravagant expansions in the business
of the country, followed by ruinous contractions," said President
James Buchanan in 1857. "At successive intervals the best and
most enterprising men have been tempted to their ruin by excessive
bank loans of mere paper credit, exciting them to extravagant
importations of foreign goods, wild speculations, and ruinous and
demoralizing stock gambling."
But we always seem to get over it.
Some hard times before World War 1
The precise beginnings and endings of recessions are as elusive
as their exact causes. Keeping that in mind, though, following is a
look at a half dozen tough economic times that the United States
went through prior to World War I.
\lou can't tax the Feds (181 9-1 82 %)
The end of the War of 1812 (in 1815) left the United States feeling
financially frisky. U.S. goods were selling well in Europe. Banks
were liberal in their lending, especially to finance the sale of public
lands in the West. Public land sales rose from $4 million in 1816 to
$13.6 million in 1818.
Things were going so well, in fact, that stock traders on New York's
Wall Street were compelled to take their business literally off the
street in March 1817, moving it indoors and forming the New York
Stock Exchange.
But a number of factors conspired to create this country's first
great economic crisis. Perpetual wars between France and England
finally ended in 1815, spurring economic growth in those countries
that competed with U.S. production. U.S. banks issued their own
currency with little ability to back it in specie or hard money, mean-
ing gold and silver coins. When they needed more money, they
simply printed more, which resulted in rapid inflation.
In 1816, Congress established the Second Bank of the United States
(the first went out of business in 181 1) in an effort to rein in the
independent banks and establish some uniformity to currency. In
1819, the Bank began calling in loans it had made to state banks,
Chapter 3: Prelude to Disaster: The Economy Prior to 1929 2 7
and it demanded hard money as payment. (Part of the reason was
that the United States needed to pay back — in gold — foreign
* ;t Jiad received to finance the Louisiana Purchase in 1803.)
wbQ(s, in turn, began calling in loans they had made,
nyVjBWtors couldn't meet their obligations. Wages fell,
ises failed, and banks closed.
DropBo®
Several states tried to counter the Bank's calling in of loans by
imposing taxes on the Bank's assets within their borders. But in
1820, the U.S Supreme Court ruled that while the federal government
had the constitutional authority to tax state and private banks, the
states did not have the right to tax a federal institution. It wasn't
until the mid-1820s that things leveled off.
The president Who didn't (ike banks (1837-1843)
Through the last half of the 1820s and first half of the 1830s, the
U.S. economy chugged along. By 1834, the national debt had been
paid off. Roads, railways, and canals were being built at a rapid
pace. Public lands in the West were being snapped up, in large part
by speculators. Land sales soared from around $2.3 million in 1830
to $24.9 million by 1836.
To finance all that activity, banks were issuing loans like crazy.
Not only that, but they were also still printing their own currency
to lend. Inflation resulted, but few people minded because there
seemed to be plenty of cash to cover things.
One guy who did mind was the president of the United States.
Andrew Jackson had an antipathy to banks in general, in part
because he had once lost a lot of money in one. He particularly
disliked the Second Bank of the United States, believing it was
unconstitutional. As a westerner, he also disliked what he viewed
as the Bank's favoritism toward the desires of northeastern
financiers and speculators.
^jjj*B£f So in 1832, Jackson vetoed a bill that would have extended the
&/^~~M\ charter of the Bank past its 1836 expiration date. He also withdrew
( jjjj j the federal government's money from the Bank and deposited it
in "pet banks" chartered by various states. In July 1836, Jackson
delivered another financial body blow by issuing the "Specie
Circular," or Coinage Act. It decreed that the federal government
would accept payment for public lands in gold or silver coin only.
Jackson's idea was to end rampant speculation and inflationary
practices spurred by banks that printed notes.
By the time Jackson left office in March 1837, the economic bubble
had begun to burst. Foreign investors decided they wouldn't
accept U.S. paper either, and they called in their substantial loans.
U.S. banks, in turn, called in their loans to people who had nothing
28 Part ': Heading into a Mess
— ^ _ With little hard
Drop Books-
to repay them with but paper. By April, businesses were failing.
Unemployment reached 10 percent, and about 800 banks closed.
money in circulation, deflation took over for
ages and prices dropped.
Jackson's successor, Martin Van Buren, took the heat for Jackson's
actions. Van Buren lost his 1840 reelection bid, and the economy
stayed in the tank until 1843.
Bad news trat/ets fast (J 857- J 8 59)
While it didn't last as long as the recessions of 1819 and 1837,
the 1857 downturn was remarkable in several other aspects. The
immediate sparks were the failure of the New York branch of a
major financial company called the Ohio Life Insurance and Trust
Company, due to embezzlement; and the sinking of the SS Central
America, which was carrying 30,000 pounds of gold from the San
Francisco mint to eastern banks.
Both events took place within three weeks of each other in late
summer, and news of both was quickly spread around the country
by the telegraph, still a relatively new medium. The immediacy of
the news heightened the events' impacts.
But there were more fundamental causes for the recession. The
end of the Crimean War between Britain and Russia drove down
demand for U.S. grain. The panicked stock selling that followed
news of the trust company collapse and gold ship sinking induced
British investors to withdraw funds from U.S. banks.
The recession was notable for one other reason. The downturn
had less of an impact on the South, where the cotton industry was
solid. That encouraged many southerners to believe they could
make an economic go of it without the North, should the country
split up.
The Railroad Depression (1873-1879)
Following the end of the Civil War in 1865, the U.S. economy found
itself driven by a boom in railroad construction. Between 1866
and 1873, 35,000 miles of track were laid. Railroads trailed only
agriculture in importance to the country's financial well-being.
In 1873, however, Congress passed a bill that called for backing U.S.
currency with gold only. Silver coins were out, and the Treasury
quit buying silver at a fixed price. The move depressed silver
prices, reduced the money supply, and created uncertainty in the
economy.
Chapter 3: Prelude to Disaster: The Economy Prior to 1929
On September 18, 1873, uncertainty turned to panic when a major
bank, Jay Cooke & Co., declared bankruptcy. The firm, which
— ^ — ^ became«prominent marketing Union bonds during the Civil War,
| \ 1T\ /^Wp*\4fctfhO plan to build a second transcontinental railroad.
I—/ I V/ KS I— J loVit«ict enough backing, Cooke collapsed.
The failure started a deluge of panicky unloading of stocks. A
stunned New York Stock Exchange closed for ten days. About 25
percent of U.S. railroads went belly up, thousands of auxiliary
businesses failed, and unemployment rose to 14 percent by 1876.
The job losses, combined with wage reductions, spurred labor
unrest around the country. Acrimony between labor and
management lasted well beyond the end of the depression,
which lasted until 1879.
When the qotd ran out (1893- 1897)
The depression that began in 1893 in many ways paralleled the
downturn of 1873. In February 1893, the largest railroad company,
the Philadelphia and Reading, went bankrupt. More railroads and
other businesses went under. Unemployment percentages climbed
into the teens. Hard times in Europe dried up investment from
other countries.
But there was a wrinkle to the 1893 depression that hadn't happened
before, and it had to do with the U.S. money supply. In 1890,
Congress had decided to require the U.S. Treasury to buy silver
with notes that could be redeemed in gold.
Coupled with a demand by European investors to be paid only in
gold, the policy resulted in shrinking U.S. gold reserves. In April
1893, officials announced that the nation's gold supply had dipped
below the $100 million minimum that federal law required be kept
on hand. Panic set in. Nervous investors, fearful they would be
paid in silver rather than gold, began runs on banks. The stock
market crashed as banks collapsed. Violent labor strikes paralyzed
railways, as they had in the 1870s.
Ultimately, the Treasury sold bonds to obtain enough gold to build
up its reserves, and the law requiring the federal purchase of silver
with gold-backed certificates was repealed. But the country didn't
fully recover until 1897.
The bankers' panic (1907-1908)
As recessions go, the Panic of 1907 was relatively short-lived. But
its eventual impact was significant. It started when two Montana
mine owners and a New York City banker tried to corner the
national copper market in October 1907.
Part I: Heading into a Mess
DropBS
The effort by F.A. Heinze, his brother Otto, and Charles W. Morse
involved taking control of banks and trusts, and using their assets
to take |>ver the copper market. Doing so would allow them to set
pleased for the metal. But the scheme failed. As a
panies involved suffered huge losses. People began
pulling money out of banks and the stock market, which lost half
its value.
Enter an unlikely hero: 70-year-old financier J. P. Morgan. The
richest banker in the country pledged huge personal sums to shore
up shaky banks. He dragooned other financiers to do the same and
was joined by the U.S. Treasury. The rescue plan worked. But the
episode rekindled debate about the lack of a U.S. central bank to
oversee the money supply and coordinate bailouts in dire times.
^jtOHfi^ In 1908, Congress established a National Monetary Commission,
c!?/t^]~\ charging it with finding a way to regulate U.S. banking. It took until
— rjv^w 1911 for the commission to craft a plan, and another two years for
x^>/ Congress to approve it. On December 22, 1913, President Woodrow
Wilson signed the bill creating the Federal Reserve System. Before
it passed the measure, however, the Senate removed a provision
that would have offered some insurance for bank depositors. That
change would cost a lot of people a lot of money in coming years.
Not much (un after World War 1
The First World War (1914-1918) had a major impact on the U.S.
economy — and a big role in the creation of the Great Depression.
The United States stayed out of the first three years of the war,
which pitted the Allies (chiefly Britain, France, and Russia) against
the Central Powers (chiefly Germany, Austria-Hungary, and the
Ottoman Empire). U.S. manufacturers and farmers took advantage of
Europe's simultaneous preoccupation with the war and demands
for food and goods by in essence becoming the war's supermarket.
Between 1914 and 1918, U.S. steel production doubled, and farm
exports tripled.
^jjjUBEff When the United States finally entered the war in April 1917 on the
<^/^\ side of the Allies (in part because they were better customers),
( jjjH J the U.S. economy was bolstered by a wave of government spending,
V^P/ which rose from $1.3 billion in 1916 to a hefty $15.6 billion in 1918.
The government raised revenues by increasing taxes and selling
bonds. The Feds also basically took over the running of the economy.
Federal boards and commissions oversaw food production and
pricing, fuel allocation, railroad operations, and labor relations.
Chapter 3: Prelude to Disaster: The Economy Prior to 1929
Organized labor didn't mind the federal oversight because it gave
some protection to those trying to organize labor unions. Union
membership increased by 40 percent between 1915 and 1918. The
fTa\dr^tLrft^& caused by the military draft brought significant
/ ViBiffeers ©fSromen into the workforce, and some 500,000 African
Americans migrated from the South to take jobs in the North and
Midwest. Wages went up, and life wasn't bad on the home front.
Then the war ended in November 1918. More than $3 billion in
federal war-related contracts were canceled almost overnight.
Several million soldiers and sailors became civilians again, looking
for jobs. Racial tensions rose as black workers were shoved out of
jobs to make room for returning white workers. Scores of strikes
sparked charges that unions were in league with communists.
The switch from a wartime economy to a peacetime economy
triggered a sharp recession in 1920. An oversupply of food and
other products caused severe deflation (a big drop in prices, followed
by stalled production, rising unemployment, and even less
demand). The unemployment rate reached 11 percent by 1921.
;jABE# Prodded by his Secretary of Commerce, Herbert Hoover, President
Warren G. Harding convened a meeting of 300 business and
banking leaders in September 1921 to discuss the unemployment
problem. The Unemployment Conference eventually organized
state and local relief efforts such as public works projects and
"work sharing" programs. This was the first time a major federal
effort was made to try to assuage the pains caused by a recession.
Things did get better, as they tend to do. Manufacturers retooled
from wartime products to consumer goods. Women went home,
opening jobs for returning veterans. By 1923, the economy was
humming again, at least for most people.
But the war left lasting marks on the U.S. economy. Technological
advances necessitated by wartime demands increased productivity.
That spurred the development of new products or improvements
on old ones, which in turn spurred consumer demand.
The role of the United States in the world economy also changed.
Prior to World War I, it had been a debtor nation, meaning its
overseas investments were smaller than the investments other
countries had in the United States. That changed after the war, as
huge public and private U.S. loans to war-torn European countries
made us a creditor nation. New York replaced London as the
Western world's financial center. And that was fine, as long as the
U.S. economy remained healthy.
32 Part I: Heading into a Mess
Sharing the Good Times
Warren G. Harding campaigned for the U.S. presidency in 1920 using
a slogan he coined himself: "A return to normalcy." He had meant
to say "normality," which should give you some idea of what a
nincompoop Harding was. Still, the slogan struck a chord with
voters. After the war and the post-war struggles, Americans were
ready to kick up their heels a bit and enjoy life. Harding was elected
in a landslide, and the Roaring Twenties started getting noisy.
Harding himself missed most of it, having had the good sense to die
in August 1923 and thus escape an administration notable mainly
for political scandal. But his successor, Calvin Coolidge, shared
Harding's political philosophy that the chief role of the government
when it came to the economy was to foster business growth.
Known as "Silent Cal" for his aversion to speechmaking, Coolidge
did manage to observe aloud that "the chief business of the
American people is business," and "the man who builds a factory
builds a temple, and the man who works there, worships there."
All three Republican administrations during the 1920s (Harding's,
Coolidge's, and Herbert Hoover's) did what they could to foster
business growth. Tariffs were raised to protect U.S. manufacturers.
Tax rates for the wealthy were lowered, purportedly to encourage
them to invest more. The Federal Reserve Board kept interest rates
low, so money was easier to borrow.
The presidents' perspectives reflected a highly popular sentiment
of the times, which was reflected by the title of a 1929 article in
Ladies' Home Journal: "Everybody Ought To Be Rich." In an era
known at the time as "the Coolidge Prosperity," the acquisition
of wealth to finance the acquisition of consumer goods, from
electric irons to mouthwash, became tantamount to being a good
American.
"As consumers of wealth, we exhibit mental and moral solidarity,"
asserted Franklin Giddings, a Columbia University sociologist, in
1922. "We want the same things. We have the same tastes."
The United States did seem richer. The gross domestic product
grew from $51 billion in 1920 to $97 billion in 1929. Disposable
income (the amount left after taxes are paid) increased from $33.3
billion in 1918 to $77.5 billion in 1928. And there was no consumer
item more attractive to disposable income in the 1920s than the
automobile.
Chapter 3: Prelude to Disaster: The Economy Prior to 1929 33
bviVinq to the qood life
Qptoia; 19£3, National Geographic ran an article reporting
thMtlJep^reie 13 million "motorcars" on U.S. roads. The author
gushed, "The demand for initiative and enterprise in those who
own and operate an automobile are giving to the American people
a training the value of which cannot be estimated in dollars and
cents."
Notwithstanding the author's sentiment, the dollars-and-cents
impact the automobile had on 1920s' America was pretty hefty:
v0 By the end of the decade, one in every eight U.S. jobs was
related to the automobile, from the people who made tires to
the people who ran roadside motor hotels, or "motels."
By 1925, there were 17.5 million motor vehicles registered in
the country, and by 1929, there were 27 million — or one for
every five Americans. Estimates showed there were more cars
in New York than in all of Europe.
Production methods had improved so much that a car that
took 14 hours to build in 1913 was coming off the assembly
line at a rate of every 10 seconds by 1925. The production
speedup was reflected in lower prices. A car that cost the
equivalent of two years' average wages before World War I
cost about three months' worth in 1929.
But the National Geographic writer was correct in that the value
of a car transcended its price for most Americans. They were no
longer captives of the streetcar or bus schedule. They could live
farther away from work, shop in distant stores, and take motor
vacations.
Early cars had been simple transportation machines, with no frills.
Automaker Henry Ford reportedly said that Ford buyers could
have a car in any color they wanted "as long as they wanted black"
(which dried faster than other colors and thus speeded up produc-
tion). But as they became more acquisitive, Americans wanted
more from their autos. Cars became an extension of a family's
lifestyle, a status symbol. "[H]is motor car was poetry and tragedy,
love and heroism," Sinclair Lewis wrote in his 1922 novel Babbitt.
Ford stubbornly stuck to no-frills cars (although he did close down
for six months in 1927 to retool his factory for production of a new
model — the Model A). However, Ford's rivals, particularly William
C. Durant at General Motors, began offering extra features for extra
money. The company began offering upscale models that made
them stand out from the neighbors' cars.
Part I: Heading into a Mess
And if someone couldn't afford to pay cash for a car, no problem.
In 1919, GM started the General Motors Acceptance Corporation
(GMAC^to let buyers purchase on the installment plan. By 1926, 75
fp"V/e"Vrtf' a^iuto buyers were buying on credit.
A dollar dotfn, a dollar a
Week: Living on credit
In 1919, the same year that General Motors Acceptance Corporation
began offering credit to car buyers, GM bought a small refrigerator
company called Frigidaire. Realizing that a refrigerator, like
a car, was basically a big box with a motor, GM began adapting
its methods of making and selling cars to making and selling
refrigerators. That included letting customers buy on credit.
Americans had traditionally viewed buying anything other than
real estate on credit as something between embarrassing and
shameful. But in the 1920s, Ben Franklin's "a penny saved is a
penny earned" maxim seemed old hat. A 1928 business yearbook
noted that installment buying "is now recognized as an integral
part of our economic life."
By the end of the decade, more than 60 percent of appliances and
furniture was being bought on installment plans. Consumer debt
rose from $2.6 billion in 1920 to $7.1 billion in 1929. Installment
buying at such high levels kept product demand — and thus
production — at higher rates than the amount of real money in the
economy could sustain indefinitely. The result was a situation that
could — and did — lead to severe deflation.
In late 1928, the National Association of Credit Men, a group of
30,000 merchants and manufacturers, warned that "making it easy
for people to buy beyond their needs or to buy before they have
saved enough to gratify their wishes tends to encourage a condition
that . . . supports a form of transaction for which credit buying is
not primarily intended." But not many people were listening.
Creating demand for needless things
One of the challenges in a consumer-driven economy is to convince
people that they need to keep consuming. That's where advertising
comes in, and in the 1920s, it became both an art and a science.
Chapter 3: Prelude to Disaster: The Economy Prior to 1929
Traditional advertising had merely suggested the availability of a
product. But in the 1920s, ads earnestly explained the necessity
of a product, even when the necessity was wholly fabricated.
and hygiene conditions were elevated to serious-
Idies: bad breath became "halitosis," sour stomach
was "acidosis," and stinky feet "bromodosis," all of which were
curable by some product or other.
The economist Stuart Chase observed in 1925 that advertising
"creates a dream world: smiling faces, shining teeth, school girl
complexions, cornless feet, perfect fitting union suits, distinguished
collars, wrinkleless pants, odorless breath, regularized bowels
(and) happy homes in New Jersey — 15 minutes from Hoboken."
The ad game became a sophisticated avocation. Its most successful
practitioners included Bruce Barton, who invented the baking icon
Betty Crocker and wrote a best-selling book called The Man Nobody
Knows. The book, which sold a staggering 700,000 copies between
1925 and 1927, portrayed Jesus Christ as a "super salesman" and
"the father of modern business." There was also Edward Bernays,
who had honed his pitchman's skills by spending summers in his
youth with his uncle, Sigmund Freud. Bernays is credited — or
blamed — for breaking down the taboo against women smoking in
public by promoting cigarettes as "torches of independence" for
the modern female.
Advertisers used sex, celebrities, and pseudo-science to sell, and
they utilized newspapers, mass-circulation magazines, and the
ubiquitous and new-in-the-1920s medium of radio to make their
pitches national. In 1919, total advertising in the United States
cost an estimated $684 million. By 1929, it was a $3 billion-a-year
business — and inspiring a whole lot of consumption, much of it
on credit.
Getting Richer, or Staying Poor
While it may have appeared on the surface that 1920s America was
installment-buying itself a life of ease and comfort, the reality was
far different.
Most working people still put in six-day weeks. Paid vacations and
pensions were rare. The U.S. Supreme Court struck down minimum
wage laws for women and children during the decade. Job security
was rare. A man held his job until he was too old or infirm to be as
productive as a younger man, and then he was out the door.
Part I: Heading into a Mess
Some employers adopted paternalistic practices (known as
welfare capitalism) to keep unions at bay. Henry Ford, for example,
periodically raised wages and shortened workweeks. There were
f^W^Vl1^ ^^ge Denents' sucn as company picnics. But when
wnpflr^/ \tems slipped, the fringe benefits quickly disappeared.
A much worse problem was the mountainous disparity in the
distribution of wealth, as evidenced by some statistics:
The wealthiest 1 percent of Americans saw their incomes
increase 75 percent in the 1920s, while the average worker's
income rose just 9 percent. The 24,000 richest U.S. households
controlled as much combined wealth as the 11.5 million at the
bottom.
f" While 0.1 percent of U.S. households had 34 percent of the
country's savings, 80 percent had no savings at all.
About 40 percent of American families in 1929 earned less
than the $1,500 annual income that the federal government
deemed the poverty level. That compares to 8.4 percent living
at the federal poverty level of $15,000 in 2006. In 1929, only 2.3
percent earned more than $10,000 a year. In 2006, 24.2 percent
earned more than $100,000, a comparable inflation-adjusted
figure.
As ominous for the economy was the growing gap between
productivity and wages. From 1923 to 1929, productivity per hour
(the amount of goods made) rose 32 percent. During the same
period, wages rose just 8 percent.
What that meant was there were too many things being produced
and not enough people with the money to buy them. A person
earning $100,000 a year was making 50 times more than the person
earning $2,000 a year. But the wealthier person wasn't likely to buy
50 times as many cars or radios or refrigerators, or to spend 50
times as much for them.
So the rich put much of their excess money into luxury items (the
making of which didn't employ a lot of people) or into investments.
That led to more productivity but not more money in the pockets
of average Americans.
Feeling downtrodden on the farm
If the average urban worker wasn't exactly rolling in clover during
the 1920s, he had it made compared to his cousin on the farm. In
fact, the best days for U.S. farmers had come and gone by the time
the 1920s started.
DropB
Chapter 3: Prelude to Disaster: The Economy Prior to 1929
D Sweet deals in the Sunshine State
TiM^Sd/tawatAaw: the only place people were looking to get rich in the 1920s.
For example, there was the Florida land boom of 1925-1926.
An estimated $450 million poured into the state, lured by promoters who promised
lush waterfront paradises or lively resort cities. Many of those who bought didn't
care if they were actually buying fetid swampland, as long as they could resell at
a higher price to someone else. And enough were able to do just that, keeping the
scheme going for months.
Eventually the speculative bubble burst, just as two hurricanes slammed into the
state, killing some 400 people and leaving 25,000 people homeless. By 1928, more
than a hundred Florida and Georgia banks thatgrewfaton speculation money went
under, taking much of the money with them.
The ridiculousness of the situation wasn't lost on the Marx Brothers, who
lampooned it in their 1929 film The Coconuts: "Why, you can get stucco," leers
pitchman Groucho in one scene. "Oh, how you can get stucco."
During World War I, the U.S. government encouraged farmers
to produce as much as they could to help feed the country's
European allies. So farmers mortgaged more land, doubling their
total mortgage debt between 1910 and 1920. As mechanized
vehicles such as trucks and tractors replaced horses and mules,
25 million acres once used to grow animal feed were put into crop
production for humans.
^jjftBE^ But when the war ended, the European markets dried up, and
^^"^f^N prices dropped. Cotton that had sold for 35 cents a pound during
( UM J the war slumped to 16 cents in 1920. Corn that had sold for $1.50
^55/ a bushel slipped to 52 cents. Farm income during the decade
dropped 50 percent. Bankruptcies in the Midwest alone quadrupled,
and more than 3 million people left farms for towns and cities.
In the South, half of the farmers lived on rented land. Those who
lacked their own capital had to pledge shares of their crops as
payment for rent and supplies. Most of these sharecroppers were
African Americans, and almost all of them were desperately poor.
Congress made some effort to help, twice passing bills that would
have established "parity" programs in which the federal govern-
ment would buy surplus crops at guaranteed prices, and then sell
them overseas for whatever the market would pay. But Coolidge
vetoed both bills. "Farmers have never made money," he said. "I
don't believe we can do much about it."
Part I: Heading into a Mess
When Hoover became president in 1929, he pushed through
Congress a bill that called for government price subsidies for farm
■— ^ producte. Within months, however, the rural depression of the
L J TO 0 D ^lOifceV^r"11 Great DepreSSi°n °f the 1930s' and life for
Immigrants and African Americans:
Getting by at the bottom of the heap
Following World War I, America's distaste for foreign entanglements
led to a series of laws limiting immigration. Even so, the 1930
Census showed that 10 percent of the population was foreign-born.
Handicapped by language and cultural barriers, immigrants got the
worst jobs and lived in the worst parts of towns and cities. As the
Great Depression took hold in the early 1930s, many of them would
turn around and go back where they originated.
Tightening immigration quotas meant U.S. industry had to find a
new source of workers. A half million African Americans left the
South for factory jobs during the war. Another 1 million would do
the same during the 1920s. But they remained second-class citizens.
Infant mortality rates for African Americans were twice those of
white Americans. Life expectancies were 15 years shorter.
In the Southwest, a half million Mexicans, whose country had been
exempted from the immigration restrictions, came for work, most
as migrant farm laborers. Like African Americans, the Mexicans
were generally tolerated, more than accepted, as a source of labor,
and their lots would get worse as the 1920s ended.
Crashing utith the Market
Few Americans actually had a direct stake in the stock market in
1929. About 3 million people, or about 2.5 percent of the country's
population of 120 million, owned shares. Only half of those who did
own stocks owned enough to involve a brokerage account. Playing
the market was mostly a rich person's game, with 30 percent of all
1929 dividends going to families with annual incomes of more than
$100,000.
But if they weren't actually in the stock market, it seemed everyone
talked about it. A visiting British journalist noted that whatever
topic a conversation started with, "in the end you had to talk about
the stock market, and that was when the conversation became
serious."
Chapter 3: Prelude to Disaster: The Economy Prior to 1929
Buying into the market on credit
Jtott^lweajfhy and the wannabe wealthy often bought stock on
(ciylitjffifpWing just 10 percent down on a purchase, for example,
a stock buyer could buy 10 times as much stock as he could afford
out of his or her own pocket. (See the Chapter 2 discussion on
buying on margin.) That was all right with brokers and other
lenders because they were borrowing money from Federal Reserve
banks at 5 percent and charging 12 percent or more to their
clients. The total loaned by brokers rose from $4.4 billion at the
beginning of 1927 to $8.5 billion in the fall of 1929.
The problem was that if brokers called in their loans, investors had
to sell their stock at whatever price it was trading at to repay the
money. If the stock was down, both the lender and the borrower
could be in big trouble.
But there was certainly money to be made, at least for a while.
The Dow Jones Industrial Average (a weighted average of 30 major
companies' stock prices) doubled from the beginning of 1928 to
September 1929. But the market was fueled by speculation, not
value. As long as stock prices kept going up, people weren't much
interested in what a company produced or if its products were
turning a profit. So money kept pouring into the market.
"The ranks of the inexperienced — the 'suckers' — were swelled
by numbers of men who had been attracted by newspaper stories
of the big, easy profits to be made in a tremendous bull market,"
a brokerage house observer wrote in a 1928 article in The Nation.
"These amateurs were not schooled in markets that had seen
stringent, panicky drops in prices. They came in on a rising tide."
There were warnings that the tide of rising stock prices must
inevitably recede. In March 1929, respected financier Paul M.
Warburg wrote that "if orgies of unrestrained speculation are
permitted to spread too far . . . the ultimate collapse is certain not
only to affect the speculators themselves, but also to bring about a
great depression involving the entire country."
Getting gored by the butts
October 24, 1929, was a cool and overcast Thursday on New York's
Wall Street. Inside the New York Stock Exchange, the morning's
session began more or less as usual. Then, at about 11 a.m., people
began selling. And selling. And selling.
0 Part I: Heading into a Mess
"The deluge broke," New York Times reporter Elliott W. Bell wrote
some years later. "It came with a speed and ferocity that left men
dazed . ■ . it was the most terrifying and unreal day I have ever seen
When the session closed, a record 12.9 million shares had sold —
so many that the ticker tape machine that relayed market prices
around the country was more than four hours behind by the end of
the day.
As the market sank on October 24, which came to be known as
"Black Thursday," a half dozen Wall Street bankers tried to calm
things down by buying up shares. One of the bankers, Thomas W.
Lamont, calmly told reporters "it seems there has been some
distress selling in the market."
^j(jABE# The bankers' effort failed. On October 29, which became known
/••JKN as "Black Tuesday," another stock-selling stampede broke out.
More than $9 billion (about $113 billion in 2008 dollars) was lost
in a single five-hour period, and 16.4 million shares were sold, a
record that would stand until 1978. Figure 3-1 offers a glimpse into
the chaos that erupted that day. Before the market hit bottom in
July 1932, its stock index (a measurement of the market's value) fell
from 452 to 58. It would take more than a decade to fully recover.
Figure 3-1: Workers flood New York City streets in a panic following the Black
Tuesday stock market crash.
Chapter 3: Prelude to Disaster: The Economy Prior to 1929
^ ^ safe betithat fe
DropBooKS
Contrary to popular myth, there was no mass exodus of despondent
brokers and speculators through skyscraper windows. But it's a
safe bet|that few investors felt like singing along to a new tune that
t a Manhattan ballroom that week.
It was called "Happy Days Are Here Again.
Lessons Learned
Following are two key lessons that Americans learned — or should
have learned — from the events leading up to, and including, the
stock market crash of 1929.
It's easy to borrow, hard to repay
If there is one lesson to be learned from the 1920s, it's that using
credit to buy things can be a slippery slope to chronic debt.
When the Great Depression ended with the start of World War II,
Americans who had lived through the hardest of hard times did
become a nation of savers. Personal savings as a percentage of
personal wealth reached a heady 26 percent during the war.
But after the war, consumerism collided with the ascension of
credit cards that allowed repayment in installments. In 1978, a U.S.
Supreme Court decision made it easier for banks to charge higher
interest rates on credit cards and cross state lines in pursuit of
customers. In the 1980s, rapidly rising inflation made the use of
credit cards an attractive way to buy things before their prices
went up. In the 1990s, home equity loans allowed consumers to tap
money that they couldn't otherwise access without selling their
houses.
By the beginning of the 21st century, Americans didn't even have
to seek credit — it sought them through endless offers that even
included paying off old credit cards with new ones. Many consumers
developed a sense of entitlement. One college professor reported
that his students referred to credit cards as "yuppie food stamps."
The resulting numbers were both stunning and sobering:
Consumer credit, not including mortgages, jumped from $700
billion in 1988 to $2.6 trillion in 2008. Over the same period,
the average personal savings rate dropped from 8 percent to
less than 1 percent.
Part I: Heading into a Mess
\* In 2007, U.S. families were devoting 14 percent of their
disposable income to paying off debt, the highest rate ever.
i5 to 2008, the amount of credit card debt reported in
^bankruptcy filings tripled, to $61,000.
When the 2007 recession began, however, consumer credit began
to dry up. Credit cards became harder to get, late payment fees
increased, and down payments rose. In August 2008, consumer
borrowing fell for the first time in a decade, indicating that —
maybe — the credit lesson of the 1920s may be sinking in.
The stock market can qo dortn
Could a big stock market crash happen again? Well, measured just
by the size of the one-day decline in the stock market, it already
did. On October 19, 1987, the market dropped 22.6 percent, far
more than the 12.8 percent it dropped on October 29, 1929.
But after the 1987 crash, the various stock exchanges installed
safeguards to protect against a complete meltdown. The safeguards
included limiting computerized transactions in overheated selling
sessions, requiring the markets to close after they fall by certain
levels over a specified time, and requiring trading firms to have
more capital available if there's a run on the market. Congress has
also created two agencies that keep an eye on things:
v0 The Securities Investor Protection Corporation: Established
in 1970, the SIPC doesn't provide insurance against broker
fraud, but it does help investors recover their securities or
cash when a brokerage firm is closed due to bankruptcy.
f" The U.S. Securities and Exchange Commission: Formed in
1934 to restore public confidence, the SEC regulates the
stock market and the securities industry. The five-member
commission oversees requirements that publicly traded
companies disclose accurate information about their firms. It
also investigates and brings civil prosecutions in fraud cases.
But even with all these safeguards available, it's worth noting that
a whole lot more people have something at stake: In the 1920s,
around 2 percent of households had a stake in the market. In the
2000s, more than 50 percent did.
DropBooks part ||
Getting Depressed
The 5th Wave By Rich Tennant
DropBooks
In this part . . .
ost Americans had no direct stake in the stock
market crash of late 1929 and consequently had no
idea what kind of economic tsunami was about to come
down on them.
All too soon, they found out.
In this part, I look at both the causes of the Great
Depression and the consequences, including the near-
collapse of the nation's banking system, record unemploy-
ment, and the resulting crushing poverty that followed. I
focus on the impact on the American family, the devasta-
tion suffered by U.S. farmers, and — oh yeah — how the
rest of the world was getting along.
Chapter 4
: A Depression
Is Born
In This Chapter
Considering causes of the Great Depression
Watching the banks collapse
Losing jobs and homes
Making a Capitol plea for help
Lessons learned
7 he Great Depression may have started with the stock market
crash in October 1929 (see Chapter 3), but the crash didn't
shoulder all the blame.
In this chapter, I look at some of the contributing factors to the
creation of the Great Depression, the early and abortive attempts
to deal with it, the collapse and resurrection of the U.S. banking
system, and how the consequences of the crippled economy
played out in the first few years after the stock market crash.
Analyzing What Happened
Explaining precisely what caused the Great Depression is like
trying to nail an egg to the wall: messy and unfulfilling. In fact,
historians and economists have argued with each other almost
since the Great Depression started about precisely what caused it,
and no one has yet come up with a universally accepted explanation.
It's reasonably safe to say that a combination of factors contributed
to the sharp economic downturn that began in late 1929, including
the bursting of the speculation bubble in the stock market, a drop
in consumer spending, a rotten banking system, and too many
poor people.
Part II: Getting Depressed
These factors were aggravated by tardy, insufficient, and misdirected
efforts to fix things. The result was that a nasty recession turned
into a tqn-year economic ordeal.
it some of the ingredients that created this economic
stew:
'I?
v0 The stock market crash: In addition to financially wiping out
tens of thousands of individual investors and speculators, the
collapse of the market crippled banks that had made loans
secured by stocks. It also greatly reduced public confidence
in the economy, which meant people reduced their spending
and investing.
i*" Too much stuff: In the 1920s, technological advances and
innovative manufacturing techniques, such as mechanized
assembly lines, meant U.S. workers were making things faster.
In fact, they were making things too fast. Estimates indicate
that by 1929, the country was producing 17 percent more
than it could buy. The result of all this overproduction was a
sudden halt to manufacturing in many areas when the economy
slowed. That halt led to layoffs and higher unemployment,
which naturally led to even less buying.
v0 Too many poor people: Most of the nation's personal wealth
was concentrated in the pockets of relatively few people. In
1929, 40 percent of U.S. families had annual incomes below
the federal poverty level. They could buy very little, and
richer people couldn't buy enough to make up the difference.
By 1930, the result was deflation: oversupplies of goods, lower
prices, lower wages, and higher unemployment. See Chapter 3
for more details on the over-concentration of wealth.
Failure on the farm: Agriculture was a major element of the
economy. In 1929, 25 percent of U.S. jobs were still on the
farm. But overproduction, low crop prices, foreign competition,
disastrous weather, and lack of credit all combined to make a
mess of agriculture. See Chapter 6 for a longer look at the fate
of farmers in the Great Depression.
\t* Other countries: Much of Europe suffered a major economic
hangover throughout the 1920s from the horrors of World
War I. The United States made efforts to cure that hangover
with loans during and after the war — $27 billion from 1914
to 1929 — most of which weren't repaid. But U.S. loans began
to dry up in the late 1920s as American dollars were diverted
into the overheated stock market.
Chapter 4: Going Bust: A Depression Is Born
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That situation made it hard for other countries to buy U.S.
products. The problem got much worse in 1930, when
Copgress approved a bill that steeply raised tariffs (taxes
n imported goods). Other countries retaliated with
tariffs, and international trade slowed to a trickle.
Putting a Happy Face
on a Gloomy Economy
In June 1930, a group of clergymen visited the White House, hoping
to persuade President Herbert Hoover to expand a federal public
works program and put more people to work.
"Gentlemen," Hoover told them, "you have come 60 days too late.
The depression is over."
It wasn't, of course. But Hoover wasn't alone in his cheery statements
in the months following the collapse of the stock market. Other
officials and academics pronounced that the "economic correction"
(Hoover used the term "depression" because he thought it
sounded better than "panic" or "crisis") would start getting better
any day. They pointed to a brief — and only temporary — rally
in the market in spring 1930 as proof things were turning around.
Business leaders made public pledges to enlarge their enterprises.
Henry Ford even pledged to raise wages for his workers to $7 a day.
The media did its part to accentuate the positive. The New York
Times declared the most important story of 1929 was not the stock
market crash but the Antarctic expedition of Admiral Richard
Byrd. In its December 1930 issue, Fortune magazine hyperbolized
that "to compute the total construction investment of U.S. industry
in 1930 would be a mathematical undertaking of colossal complexity."
^j*be# But the numbers told a much less rosy story. Private capital
&fft \ investment (money spent for fixed assets such as land, buildings,
( Uffl j or machinery) fell from $35 billion in 1929 to $23 billion in 1930, on
^55^ its way to an emaciated $3.9 billion in 1932. One survey showed
the earnings of 200 non-automotive companies declined 19 percent
in the first three months of 1930 compared to 1929. Auto company
earnings plummeted 40 percent in that same period.
()$ Part II: Getting Depressed
— ^ I— ^ those people v
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While Ford did raise wages, he did so by giving raises to some
workers and laying off others. Then he contracted the work of
those people who had been laid off to other companies, which paid
as little as $ 1 a day. Such tactics helped nearly triple
unemployed Americans, from 1.5 million in 1929 to
4.3 million in 1930.
As the reality of the situation began to sink in, many of Hoover's
top aides, particularly Treasury secretary Andrew Mellon, advised
the president to do nothing. Business leaders joined the chorus.
"The fact that we have let nature take its course may augur well
for the ultimate prosperity of the country," said New York Stock
Exchange president Richard Whitney. Others saw that approach
as a convenient cover for not having a clue how to fix things. "The
great advantage of allowing nature to take its course is that it
obviates thought," observed economics writer Stuart Chase.
Hoover did make some efforts (which are covered in more detail
in Chapter 12). He tried to coax business leaders into maintaining
wage rates. He expanded federal public works projects. He asked
the Federal Reserve System to ease credit requirements and lower
interest rates. He promoted a national charity drive in the winter of
1929-30 (which raised an anemic $15 million).
But nothing seemed to help. In mid-January 1931, former President
Calvin Coolidge came up with the understatement of the decade in
his syndicated newspaper column. "The country," he wrote, "is not
in good condition."
Banking in Ruins
The U.S. banking industry wasn't in such great shape even before
the onset of the Great Depression. Between 1865 and 1920, banks
had closed at an average rate of about 57 a year. In the Roaring
Twenties, however, the average jumped to 635 closures a year.
Most of the banks that closed were small rural operations that
were usually underfunded and overly ambitious when it came to
investments. These banks were often operated by people who
were crooked, stupid, or both. Senator Carter Glass of Virginia
sniffed that such banks were "pawn shops (run) by little corner
grocery-men calling themselves bankers."
Chapter 4: Going Bust: A Depression Is Born
Reacting to the crash
ff^itfilstaf^ market crash, things only got worse for banks.
£J>|^cq that had made large investments in the market or
issued loans to brokers and speculators closed. That made
depositors at other banks nervous, and they began withdrawing
their money to store it under the mattress or bury it in the backyard.
Banks tried to meet the demand for cash by selling off their bonds
and real estate holdings, often at a loss, which made their financial
condition even worse.
jjjjUBSf The number of failed banks soared to more than 1,300 in 1930, 600
of them in the last two months of the year. More than 2,000 failed
V f» ) in 1^31, and more than 3,000 in 1932. In those three years, they
took with them more than $2 billion in depositors' savings — $28.4
billion in 2008 dollars.
Many of the banks were small and in rural areas or small towns
and cities. But on December 11, 1930, the Bank of United States in
New York City closed. The failure wiped out $200 million belonging
to more than 400,000 depositors, many of them immigrants. It was
the largest commercial bank failure in U.S. history.
The bank might have been saved with help from other banks in the
city, but the other banks refused. Some historians have attributed
the refusal to the fact that the Bank of United States's principals, as
well as many of its customers, were Jewish. Whatever the reason,
the failure only increased the public's distrust of banks — and its
dislike of bankers.
A popular joke at the time went, "Don't tell my mother I'm a
banker, it would break her heart. She thinks I play the piano in a
whore house." A British visitor related that U.S. bankers were "the
most despised and most detested group of men" in the country.
biqqinq a deeper hole
Some of the public's antipathy was justified. At a U.S. Senate hearing
in January 1933, more than a few bankers admitted they had used
bank funds to speculate in stocks, made unsecured "loans" to bank
officials, evaded taxes, and used bank assets to set up outside
companies they controlled.
$0 Part II: Getting Depressed
The 16-year-old Federal Reserve Board could have helped by
pumping more money into the economy and lowering interest
rates tdmake it easier for banks to borrow. But unsure of its
disinterested in the plight of smaller banks that were
. > v. Ix ,e4)f the system, the Fed failed to act decisively.
President Hoover first tried to get banks to help each other.
When that effort failed, he pushed through the creation of the
Reconstruction Finance Corporation. The RFC was designed to
make loans to banks and other financial institutions so they
could make loans to businesses. But businesses needed credit
less than they needed customers, and banks weren't anxious to
extend themselves further by making loans.
So things got worse. People withdrew their money in fear their
banks would close, often demanding payment in gold. Bank lobbies
were jammed with panic-stricken customers.
The situation fostered some innovative thinking. A Utah bank
manager tried to minimize the damage by instructing tellers to count
out withdrawals as slowly as possible. A woman in New York City
rented her baby to other customers for 25 cents: Holding a child in
their arms entitled them to move to the front of the long lines.
But the crowds didn't work out to everyone's advantage. A would-be
robber in Arkansas was thwarted because the bank was so
crowded he couldn't cover everyone: A customer slipped out and
got the sheriff.
So much money was withdrawn and hoarded, it's estimated that
one-third of the nation's money supply was out of circulation by
the beginning of 1933. Some communities, such as Salt Lake City,
resorted to creating their own currency, which was used to pay
workers and was accepted by local businesses.
"Our banking system was the weakest link in our whole economic
system," Hoover later wrote in his memoirs. "(It was) the worst
part of the dismal tragedy with which I had to deal."
It was soon part of his successor's new deal.
Taking a great bank holiday
As 1933 began, the country's financial system was on the verge of
collapse. In the first two months of the year, more than 4,000 banks
closed their doors. In mid-February, Michigan Governor William A.
Comstock declared a banking moratorium for the entire state. He
called it a "bank holiday."
Chapter 4: Going Bust: A Depression Is Born § /
— N |— ^ 48 state* nad d
DropBodEs
Other states followed. By March 4, the day Franklin D. Roosevelt
was sworn in as the 32nd president of the United States, 38 of the
48 state* had declared partial or total "bank holidays."
e it unanimous. The day after taking office, the new
president issued an executive order closing banks across the
country and banning the export of gold. The order was, legally
speaking, a bit of a stretch of presidential power, so FDR also
called Congress into special session to ratify his order.
In the meantime, Americans began coping with a severe cash
shortage caused by the banks being closed. Remember, this was in
the days before ATMs and credit cards:
A boxing tournament at New York's Madison Square Garden
accepted false teeth, spark plugs, Bibles, and a box of egg
noodles, among other things, in lieu of the 50-cent admission fee.
u* A professional wrestler in Wisconsin signed a contract to
perform in exchange for a can of tomatoes and a peck of
potatoes.
v0 A newspaper in Ohio offered to trade ad space for produce.
The lack of change was a particularly vexing problem. Manhattan
hotels sent bellboys to nearby churches to exchange bills for coins
from the collection plates. Storekeepers in Elgin, Illinois, flocked to
the house of a 16-year-old boy who, according to a local newspaper
story, had collected 11,357 pennies toward his college education.
And the country chuckled when it heard that for lack of change,
the notoriously tight-fisted tycoon John D. Rockefeller had been
forced to tip his golf caddy a dollar instead of his customary dime.
Federal bank officials, meanwhile, were trying to figure out how
to get people to bring back to the banks all the gold and gold
certificates they had withdrawn. On March 8, the Federal Reserve
Board announced that lists would be made of everyone who had
withdrawn gold after February 1 and not redeposited it by March
13. The announcement sounded ominous, although there wasn't
any legal penalty for not redepositing the gold.
Breathing new life into the banks
On March 9, Congress approved the Emergency Banking Act of
1933 — and it did so with lightning speed. Congress spent only 35
minutes debating and voting on the bill, which was signed by FDR
eight hours after it had been introduced.
5 2 Part ": Getting Depressed
<£to The act authorized what Roosevelt had already done. It also
yrxTX declared that banks could not be reopened until they had passed
r_^Hr*Tj muster jrom an army of federal auditors that already had been
/fl|rfaTfcl^l©the nation's 18,000-plus banks. The act extended
Y<J VtreTwrelicrefi^ authority over credit and currency and gave
him the power to set gold and silver prices. It authorized the
Reconstruction Finance Corporation to buy stock in banks to
help shore them up. And it approved the printing of $2 billion in
new currency, backed not by gold but by the assets of the banks.
Naturally, the new bills were sent only to the banks that proved
they had assets.
The Bureau of Engraving and Printing roared to life. By March
11, planes were lifting off from Washington, D.C., to deliver the
money. The next evening, Roosevelt spoke to the nation, via radio,
to explain what had happened and to ask people to go back to the
banks.
"I can assure you, my friends, that it is safer to keep your money
in a reopened bank than it is to keep it under the mattress," the
president told an estimated audience of 60 million. "You people
must have faith . . . we have provided the machinery to restore our
financial system, and it is up to you to support and make it work."
It worked. Hoarded gold and notes poured back into the banks.
One Arizona bank reported taking in $640,000 in deposits the day
after FDR's speech, while paying out only $32,000 in withdrawals.
By March 15, 69 percent of the country's banks had reopened.
In June, Congress passed the Glass-Steagall Act, which established
the Federal Deposit Insurance Corporation. The FDIC was given
authority to insure bank deposits up to $2,500 per depositor per
bank. Federal oversight was extended to all commercial banks. The
FDIC was funded by charging fees to financial institutions.
For all his zest for reforms, Roosevelt didn't like the Glass-Steagall
Act because he thought it represented too big a commitment for
the federal government to make. But he signed the bill anyway,
and it worked. Between 1921 and 1933, bank depositors had lost an
average of $156 million a year. In 1934, the amount lost dropped to
less than $1 million.
Chapter 4: Going Bust: A Depression Is Born
Becoming Jobless, Homeless,
On June 18, 1931, U.S. newspapers carried a brief story from
the West African country of Cameroon. The story reported that
members of the Bulu tribe had raised $3.77 and had given it to
a Presbyterian Missions Board to help the down-and-out people
in the United States. The gesture was made after the residents of
Cameroon had read in a local paper that "there are actually people
in America who do not have enough to eat."
While the gesture may have amused some, what had motivated the
Cameroonians was undeniably true: Some Americans were hungry,
homeless, and unemployed. And it seemed that more people
joined their ranks every day.
The writer Sherwood Anderson described watching "men who are
heads of families creeping through the streets of American cities,
eating from garbage cans; men turned out of houses and sleeping
week after week on park benches, on the ground, in the mud under
bridges . . . our streets are filled with beggars, with men new to the
art of begging."
Watching jobs disappear
As the Great Depression ground on, the grim employment statistics
piled up:
»> The number of businesses in the country dropped from 2.2
million in 1929 to 1.9 million in 1933.
Unemployment rates inexorably climbed: 1.5 million in 1929;
4.3 million in 1930; 8 million in 1931; 12 million in 1932; 12.8
million in 1933. By 1933, 24.9 percent of the entire civilian
labor force was jobless.
V Total wages dropped from $50.4 billion in 1929 to $30 billion
in 1932.
v* Inflation-adjusted per capita income slumped from $681 in
1929 to $495 in 1933. At the Depression's depths, 28 percent of
Americans had no income at all.
Part II: Getting Depressed
The effects on some regions and communities were even more
depressing than the big-picture numbers. By the end of 1931,
— ^ — ^ unemployment in Chicago was at 40 percent, and it stood at 50
J ]Tr\ 1T\ fp^/e^tuff'fl©roit. In the steel town of Donora, Pennsylvania, it
i-^ I *J yJ I— ' VnfisWtJmVte* in 1932 that only 277 of the town's 14,000 residents
had jobs.
The interrelationships of industries exacerbated things. Steel
production dropped because railroads shrank. In the 1920s, U.S.
rail companies had purchased 1,300 locomotives a year. In 1932,
they bought none. As farming shriveled, demand for fishmeal
fertilizer and livestock feed waned. As a result, sardine prices
dropped from $1 1 a ton to $6 a ton. As construction fell, lumber
production declined with it. Washington State had produced 7.5
billion board feet in the mid-1920s; in 1932, it produced 2 billion.
It was a buyer's market for employers. New York City department
stores, for example, required elevator operators to have college
degrees and had no problems filling the jobs. Other employers
cut wages to microscopic levels. Hourly rates fell to 10 cents for
lumbering and 6 cents for brick-making. Garment workers were
paid $2.39 for a 55-hour week.
The 50 percent of coal miners who weren't out of work were paid
$10.88 a month. And some weren't even paid in U.S. currency,
but company scrip, which could be spent only at company-owned
stores.
In 1931, a Harlan County, Kentucky, miner wrote to federal officials:
"We are half fed because we can't feed ourselves and families with
what we make. And we can't go to a cut rate store and buy food
because most all the company forbids such trading. If you got the
cash. But now we have no cash. And the companies keeps their
foodstuffs at high prices at all times. So you can not clear enough
to go anywhere. And if you do go some where and buy food you
are subject to be canned."
If wages weren't cut, the hours worked were. In 1932, U.S. factory
workers averaged 32 hours of work a week, down from 44 in 1929.
Other companies cut jobs in half, figuring it was better to employ
two people half-time than have one go jobless.
While some employers cut wages and hours just to keep the doors
open, others were unapologetic about exploiting the situation.
The president of the National Association of Manufacturers, J.E.
Edgerton, told a Senate committee that "I've never thought of
paying men on the basis of what they need. I pay for efficiency. I
attend to all those other things, social welfare stuff, in my church
work."
Chapter 4: Going Bust: A Depression Is Born £f)
An apple a day
growers in the Pacific Northwest found themselves with a
umper crop, oo someone at the International Apple Shippers Association came up
with an idea: Why not marry the excess fruit, in an economic sense, with all those
jobless people in the big cities of the East?
The idea caught on. People could buy a crate of about 60 apples for $1.75. At a
nickel each, they could gross $3 a day and net $1 .25. It wasn't much, but it beat
nothing at all.
By November 1930, city streets were packed with apple sellers. In New York City
alone, there were an estimated 6,000, "some so near each other they could hold
hands if they weren't competitors," in the words of one writer.
Journalist Frederic J. Haskin noted that "in the great industrial cities where
thousands have been walking the streets, some for months, in search of work, apple
selling is going forward briskly. One cannot walka city square without encountering
vendors of the fruit."
In Akron, Ohio, city officials heard that some apple sellers were making $50 a week.
So officials required the sellers to give up their spots every two weeks and let
someone else have a chance.
Apple selling lasted only until the big crop ran out. A sign displayed by one seller
summed up the experience: "We used to have to eat an apple a day to keep the
doctor away. Now we have to sell a few apples a day to keep the wolf away."
President Herbert Hoover held a variation of that sentiment. He
disliked wage cuts but disapproved of government interference in
setting wages. But in June 1930, Hoover did approve $2.3 billion in
public works projects to create jobs.
In October, he formed the President's Emergency Committee
for Employment. The committee came up with a list of inane
recommendations (for example, the unemployed should spend
less for food) and ran an equally inane advertising campaign to
buck up the public's morale. The committee's director told a
congressional committee, "I think that what we need is that
everybody go back to work and have full pay for all jobs."
But stating the obvious didn't help much. Americans were willing
to go to work, if they could find it. "I would be only too glad to dig
ditches," a North Carolina man wrote federal officials in 1933, "to
keep my family from going hungry."
Part II: Getting Depressed
MoOinq to the streets
jloyment meant more people without rent money or
ftgjbje^a^rients, which meant more people became homeless.
Jy the end of 1931, hundreds of thousands were on the street or
living in temporary shelters.
In Philadelphia, there were as many as 1,300 evictions a month.
Children in a daycare center played a game that involved moving
toy furniture from one corner of the room to another. "We ain't got
no money for the rent," a child explained to a teacher, "so we've
moved into a new house. Then we got the constable on us, so we
moving again."
In Chicago, Judge Samuel E. Heller presided over a landlord-
tenants court. "I had an average of four hundred cases a day," he
recalled several years later. "It was packed. People fainted, people
cried 'where am I going?'"
Many homeowners were scarcely better off than renters. Deflation
was at work in the housing market as well as elsewhere in the
economy. A house that had sold for $5,000 in 1926 might be worth
$3,200 in 1932. Banks were often eager to unload properties as fast
as they could when the mortgage got behind, before the property's
value declined further. By the end of 1933, it was estimated, as
many as half of the home mortgages in the country were in default.
The homeless had few options, none of them attractive. For a dime,
a single homeless man might get a bed for the night in a smelly
and flea-ridden flophouse. If he didn't have a dime, he might seek a
resting place near the municipal incinerator. It meant sleeping on
garbage, but at least it was warm.
For a family, if there were no friends or relatives to go to, moving
into abandoned buildings was an option, but it meant living with
no electricity or running water. Some cities had shelters, but stays
in them were limited.
Then there were Hoovervilles: collections of shacks and sheds
made of everything from flattened tin cans to packing crates,
derisively named after the president. Virtually every big and
medium-sized city had one, perched on vacant land usually on
the outskirts of town. In Oakland, California, the "community"
was situated around and inside large abandoned concrete sewer
pipes. In San Francisco, it was a field of abandoned trolley cars. St.
Louis had the largest Hooverville, with distinct "neighborhoods."
Charitable facilities that provided food — from soup kitchens to
bread lines — were usually nearby.
Chapter 4: Going Bust: A Depression Is Born § "J
DropBws
Although the tenants were technically trespassing, most cities
were pragmatic enough to tolerate them, mostly because no one
had a bftter idea that was economically practical. (In Seattle, city
burned down the city's Hooverville, and twice it was
Local officials often did require that minimal health and safety
regulations be met; for example, structures had to be built above-
ground and have windows, and trash and human waste had to be
disposed of properly. Some Hoovervilles established their own
governments and adopted rules and regulations. Structures were
even bought and sold.
^to Hf^ In 1933, the Federal Transient Program began. The program took
, X different forms in different areas. In small towns, the federal
- K_Vjy government contracted with local charities, hotels, and restaurants
Xs^>^ to provide food and lodging. About 300 camps were established in
rural areas using surplus Army equipment. The program's facilities
were efficiently maintained, and sometimes they provided work.
By 1935, when it was phased out, the program had registered a
million people and operated 600 centers.
In 1935, the Roosevelt administration shifted its focus to programs
designed to keep families from becoming homeless in the first
place. A sharp economic downturn in 1938 repopulated the
nation's homeless "towns," but by the time the United States
entered World War II in 1941, most of the Hoovervilles had been
dismantled.
Going, hungry
In mid-1933, Harry Hopkins, President Roosevelt's top man when
it came to relief programs, sent a former reporter named Lorena
Hickok to travel around the country and report to him what she
found.
Hickok found hunger. In West Virginia, she was told there were
children that had never tasted milk. In Kentucky, she was told that
five babies had starved to death in the ten days before she arrived.
In South Dakota, she found farmers eating soup made from spiny
Russian thistle.
"We have been eating wild greens, such as Polk salad," a Kentucky
coal miner wrote federal officials. "Violet tops, wild onions, forget-
me-nots, wild lettuce and such weeds as cows eat, as a cow won't
eat poison weeds."
58
Part II: Getting Depressed
That kind of desperate hunger in a nation that had fed itself and
much of Europe, too, during World War I was hard to believe, so
some chose not to believe it.
o*«iy re Wtually starving," President Hoover told reporters in
1932. "The hobos are actually better fed than they have ever been.
One hobo in New York got ten meals in one day."
^j*BE« But there were people starving, and tens of thousands more suffering
&f$\ from nutrition-related diseases such as pellagra and rickets. The
( llM ) New York Citv Welfare Council reported 29 cases of starvation in
that city alone in 1932, with 1 10 more dead from malnutrition.
The author Thomas Wolfe wrote of watching "the homeless men
who prowled in the vicinity of restaurants, lifting the lids of garbage
cans and searching around inside for morsels of rotten food."
In addition to grazing as the Kentucky miner's family did, there
were reports of orderly lines at refuse dumps as people waited
their turn to scavenge the garbage. A Chicago widow told a social
worker she always removed her glasses before cooking meat she
had found, to avoid seeing the maggots.
Some of the more well-to-do and perhaps well-intentioned citizens
instructed their servants to give their leftovers to the poor, and
Hoover's Secretary of War, Patrick Jay Hurley, even endorsed a
suggestion for a federal program in which garbage from clubs,
hotels, and restaurants would be collected in five-gallon containers
and distributed to the needy by the Salvation Army. The idea was
rejected.
Slightly less humiliating were the bread lines and soup lines that
appeared in most cities and were sponsored by a combination of
private donors and public agencies. Figure 4-1 depicts a typical
bread line.
By the end of 1931, it was estimated that 85,000 meals a day were
being served in New York City's 82 bread lines. The two biggest
were at Times Square and sponsored by newspaper tycoon William
Randolph Hearst. In Chicago, top gangster Al Capone sponsored
the largest line.
An observer of a New York line wrote that "wretched men, many
without overcoats or decent shoes, usually began to line up soon
after six o'clock, in good weather or bad, rain or snow."
Chapter 4: Going Bust: A Depression Is Born
Figure 4-1: An aerial view of a New York City bread line in 1930, stretching the
length of a block with tents set up for distribution.
Most disturbing was the impact hunger had on children. In
October 1932, the New York City Health Department reported
more than 20 percent of the children in the city's public schools
were suffering from malnutrition. A survey by the American Friends
Service Committee of mining regions in five states concluded the per-
centage of hungry children was sometimes as high as 90 percent.
The committee said the children suffered from "drowsiness,
lethargy and sleepiness," as well as mental disabilities. A Chicago
principal told a congressional committee in 1932 that he instructed
his teachers to ask an unruly child what he had had for breakfast
before disciplining him, "which usually brings out the fact that he
has had nothing at all."
A story widely reported in the 1930s concerned a West Virginia
teacher who told an ill-looking child she should go home and eat
something. The girl replied, "I can't. This is my sister's day to eat."
In 1933, Congress approved the Federal Emergency Relief Act,
which was designed to pump federal aid for food, clothing, and
other necessities through state and local governments. The act,
which provided $500 million in aid, is covered in Chapter 13.
60 Part II: Getting Depressed
Marching an Washington
Soherent and forceful plan to combat the nation's
began to stir unpleasant thoughts of revolution in
Magazine and journal articles debated the chances of a mass
insurrection. Chicago Mayor Anton Cermak told a House committee
that the federal government could send relief to Chicago — or it
could send troops to quell the violence that would follow if no
relief came. A labor leader warned a Senate committee that if
nothing was done, "and starvation is going to continue, the doors
of revolt in this country are going to be thrown open."
In fact, there were sporadic incidents of violence and looting, much
of it ignored by the newspapers for fear of encouraging copycat
actions. But nothing occurred on a scale large enough to suggest
an organized revolt until the "Bonus Army" reached Washington,
D.C., in the summer of 1932.
The "Army" was a group of about 20,000 military veterans from
around the country who wanted to accelerate the payment of
bonuses they had been promised by Congress in 1924 for service
during World War I. The bonuses were scheduled to be paid in
1945, but hard times had prompted the vets to seek immediate
payment.
The veterans made camp around Washington, with the main
settlement at a place called Anacostia Flats, across the Potomac
River from the Capitol, and they waited. On June 17, the House
voted to pay the bonuses, but the Senate rejected the idea. About
half of the vets went home, but the rest stayed.
On July 28, Washington, D.C., police were ordered to evict the
remaining veterans. A fight broke out, and two vets were shot
and killed. President Hoover, who had refused to meet with the
veterans (although he did offer them $100,000 in aid if they would
disperse), ordered the army to clear them out.
Under the command of Chief of Staff General Douglas MacArthur
and backed by six tanks, infantry and cavalry charged into veterans
massed along Pennsylvania Avenue. Ignoring orders from Hoover
to stay out of the main camp, MacArthur had the settlement
burned. Two babies in the camp died from tear gas, a 7-year-old
boy trying to rescue a pet rabbit was bayoneted in the leg, and
hundreds were injured.
DropBosk
Chapter 4: Going Bust: A Depression Is Born ^ /
■— ^ with a generous
DropB©0lss
Administration officials tried to justify the attack. A War
Department official called the vets "a mob of tramps and hoodlums,
with a generous sprinkling of communist agitators." MacArthur
the vets had not been routed, "I believe the institutions
ent would have been severely threatened."
But newsreels, photos, and news accounts of the attack sickened
many Americans.
"Soup is cheaper than tear gas bombs," New York Representative
Fiorello La Guardia said in a telegram to Hoover, "and bread is
better than bullets in maintaining law and order in these times of
depression, unemployment and hunger."
Lessons Learned
Some lessons are learned the hard way, and two lessons from the
Great Depression were learned in the hardest of ways.
It took the loss of the life savings of hundreds of thousands of
Americans to win the creation of a national insurance program for
bank deposits. And the hesitant and wrongly directed efforts of the
Hoover Administration in response to the economic mess taught
future administrations to move quicker — and in the opposite
direction — when the U.S. economy was on the skids.
Safeguarding savings: The FDlC
Created by Congress in the wake of the 1933 banking industry
crisis, the Federal Deposit Insurance Corporation is basically just
what the name implies: a U.S. government corporation that insures
deposits at banks and financial institutions that are members.
Starting with maximum coverage of $2,500 per customer per
bank on January 1, 1934, the FDIC now insures up to $250,000
per investor per bank. (That amount is scheduled to decrease to
$100,000 in January 2010.)
Keep in mind that the insurance amount is not per account,
but per investor. For example, if you have $80,000 in a checking
account (congratulations!), $100,000 in a savings account, and
$100,000 in a certificate of deposit (CD) all at one bank, you'd have
$280,000, which means $30,000 wouldn't be covered. But if you and
your spouse are joint holders of those three accounts, then the
total amount would be covered because each of you is entitled to
up to $250,000 in coverage.
Part II: Getting Depressed
The FDIC is directed by a five-member board, appointed by the
president and confirmed by the U.S. Senate. No more than three
board members can be of the same political party. The corporation
fRSsia"lljpL^4©0 employees and insures funds in about 8,500
SHBftfcftrorBWflember banks pay insurance premiums and must
meet minimum requirements for liquidity (availability of assets)
and reserves.
The two most important things about the FDIC for most people to
know are
v0 It does not cover stocks, bonds, mutual funds, or insurance
annuities, even those that are purchased through an FDIC
member bank.
No one has ever lost a penny in an FDIC-insured account.
That's not to say that banks don't fail anymore. In fact, the longest the
United States has gone without a bank failing since 1933 was from
June 24, 2004, to February 2, 2007. From 1987 to 1989, slightly more
than 200 banks per year failed, many of them in the Southwest,
which suffered a sizeable slump in its energy industries. In July
2008, FDIC regulators took over the IndyMac Bank in Pasadena,
California. With $32 billion in assets, it was the third-largest bank
failure in U.S. history. The two bigger ones were in 1984 and 1988.
But it's probably safe to say that for all practical purposes, the U.S.
government would have to fail before FDIC-insured deposits would
be at great risk (which may or may not be of comfort to you).
Reacting to economic downturns
Since the Great Depression, the federal government's response
to downturns in the economic cycle has generally taken one of,
or some combination of, three forms: lowering interest rates to
encourage more borrowing and private investment; increasing
government spending, either through public works projects or tax
cuts; and maintaining and expanding "safety net" programs such as
welfare and unemployment insurance (see Chapter 5).
That's pretty much the opposite of what the Federal Reserve
Board and the Hoover administration did in the months following
the October 1929 stock market crash, when they raised interest
rates and taxes and rejected the ideas of more government
spending and direct relief programs.
Chapter 4: Going Bust: A Depression Is Born 0^
r-N i-^ general
DropBasa
Since the end of World War II, the trio of lower interest rates,
government stimulus spending, and safety net programs has
general^ worked to minimize the impact of recessions, or at least
b^n them. For example, after the 1987 stock market
MMvas actually bigger than 1929's when measured by
the percentage of value lost), the Federal Reserve Board quickly
lowered interest rates and increased liquidity in the financial
system until it was clear there wasn't going to be a major economic
meltdown.
In the face of the severe economic recession that began in late
2007, both the administrations of President George W. Bush and
President Barack Obama employed combinations of tax cuts and
public works spending, lowered interest rates, and expanded
public assistance programs.
That's not to say that government tinkering hasn't sometimes
caused problems. Some economists contend that periodic efforts
to slow inflation by tightening the money supply have helped
trigger recessions. As one economist put it in 1997, "None of the
U.S. (economic) expansions of the past 40 years have died in bed
of old age; every one was murdered by the Federal Reserve."
In general, however, the three-pronged approach of more govern-
ment spending, lower interest rates, and provision of safety
net programs has helped stave off an economic crisis like that
of the 1930s.
Part II: Getting Depressed
DropBooks
Chapter 5
DroPBo&ting Face to Face
with Hard Times
In This Chapter
Aiding the needy without the federal government's help
Creating work wherever possible
Trying to cope with family pressures
Struggling to survive as minorities
Lessons learned
7 he Great Depression deeply affected not only the U.S. economy
but also the American psyche. The widely held belief that hard
work and a responsible attitude would result in a comfortable and
secure life (if not always wild success) was challenged by forces
that seemed out of the control of everyone.
In this chapter, I show you how hard it was for some Americans to
accept help, how hard it was for the federal government to give it
(at least under Herbert Hoover), and how local governments and
private sources tried to fill the gap. You also find out how people
adapted to the times in their day-to-day lives, how traditional
family relations and social institutions were affected, and how
things got worse for those already at the bottom of the economy.
Looking for Relief
Since colonial times, Americans had had a high regard for standing
on their own feet and a deep aversion to asking for help. In 1835,
the French social scientist Alexis de Tocqueville noted how
deeply ingrained the trait of individualism was in Americans.
Individualism, he wrote, "is a mature and calm feeling, which
disposes each member of the community to sever himself from the
mass of his fellows, and to draw apart with his family and friends."
Part II: Getting Depressed
In October 1928, Republican presidential candidate Herbert Hoover
gave a speech that extolled "the American system of rugged
individualism" over the "European philosophy" of "paternalism
iaTW^Yl^ s@" Hoover said "our country has become the land of
^^]»«lltl^^^6 those born without inheritance, not merely because
of the wealth of its resources and industry, but because of this
freedom of initiative and enterprise."
When Hoover was confronted as president with the grim reality
that millions of Americans needed help that was beyond their
abilities to provide for themselves, his first impulse was to deflect
the responsibility to state and local public and private agencies.
"The basis of successful relief in national distress is to mobilize
and organize the infinite number of agencies of relief help in the
community," Hoover said in February 1931. "This has been the
American way of relieving distress among our people, and the
country is successfully meeting its problem in the American way
today."
He was partially right. The traditional way of handling hard times
was to do so at the local level. Except for a few natural disasters,
the federal government had steered clear of providing direct relief
(that is, food, clothing, shelter, cash, and other necessities of daily
life). But Hoover was wrong in contending that the country was
"successfully meeting its problem."
Trying to help at the beat ietiel
The failure to provide enough help didn't result from lack of trying.
In April 1931 in Portland, Oregon, voters approved a $2 million
bond issue for relief programs. In Fort Wayne, Indiana, private
fundraising drives raised $775,000. In Boston, city employees
contributed one day's pay to a relief fund that collected $3 million.
Newspapers across the country called on their readers to find
odd jobs or home repair chores for an out-of-work neighbor. The
Moberly, Missouri, Monitor-Index, for example, announced on April
3, 1931, that the local Salvation Army was organizing a spring
cleaning week: "A list of worthy unemployed is being compiled at
the organization's headquarters, and residents will be asked to
call on these unemployed for help in spring housecleaning, lawn
raking, garden planting, cleaning basements and other spring
improvements."
On the same day in Jefferson City, Missouri, a city alderman
proposed temporarily raising the town's gasoline tax by two cents
to finance some street repairs. The Jefferson City Post-Tribune
reported that Alderman B.F. Reed "said the plan would result in
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Chapter 5: Coming Face to Face with Hard Times
the employment of forty or fifty men, which, he said is the principal
object for the suggestion."
OnOtte
1 1 WSC l H 1 1* MC
rnment and private relief efforts fell light-years short
need. In 1932, the total combined amount raised by
charities and the municipal government in New York City reached
$79 million. That was less than the city's army of unemployed had
lost in wages in one month. In Chicago, it was estimated that lost
wages were averaging $2 million a day, while relief funds were
averaging only $100,000 daily.
"I am stating that the funds we have are altogether inadequate to
meet the situation," Arthur T. Burns, the head of the Association of
Community Chests and Councils, told a Senate committee in 1931.
Churches had suffered declining attendance — and leaner collection
plates — throughout the 1920s, and most were in no position to
extend substantial aid. States likewise were mostly broke in 1931,
or close to it. With the exception of New York (where Governor
Franklin D. Roosevelt had put together a competent relief agency),
state relief programs were minimal.
The unemployment problem, meanwhile, was massive. By March
1933, about one of every four able-bodied, working-age Americans
was jobless. Because most of them were men with families to
support, that statistic meant that as many as 40 to 50 million
people — from 30 to 40 percent of the entire U.S. population —
had no regular source of income.
"We can no longer depend on passing the hat and rattling the tin
cup," wrote William Allen White, the nationally known editor of the
Emporia (Kansas) Gazette, in calling for federal intervention. "We
have gone to the bottom of the barrel."
Getting the feds inVoiVed . . . stou/ty
Hoover remained stubbornly opposed to direct federal relief. His
opposition wasn't based on a callous disregard for people's troubles.
But he feared that federal relief programs would create a permanent
underclass of Americans dependent on government handouts. He was
also nervous about deciding questions such as who would get help
first, how much help they would get, and for how long. And he was
dubious about the federal government's ability to pay for it.
In February 1931, Hoover said that if the time ever came that local
and state governments failed to have enough "resources with
which to prevent hunger and suffering ... I will ask the aid of every
resource of the federal government." But, he added, he had "faith
in the American people that such a day never come."
Part ": Getting Depressed
In March 1931, Hoover vetoed a bill that would have provided loans to
needy veterans. "I regard the bill as unwise," he wrote in his veto
messaga. "Of much greater importance is the whole tendency to
i6%afnicMTe^leral treasury to a thousand purposes . . . each of them
me^anier of self-reliance and self-support in our people."
But Congress overrode Hoover's veto, and the president grudgingly
acquiesced to the idea of the federal government providing some
help. Even then, however, it wasn't direct help. In early 1932, Hoover
signed into law the establishment of the Reconstruction Finance
Corporation. The RFC helped prop up banks and other businesses
with federal loans, but it did little to help the jobless guy on the street.
As humorist Will Rogers put it, "the money was all appropriated
for the top, in the hopes it would trickle down to the needy." But
little trickling occurred, and jobless men waited for help.
Facing a reelection campaign and under increasing pressure from
rival Democrats in Congress, Hoover finally agreed to expand the
powers of the RFC so it could assist states in providing direct relief
to people. But it was too little — only $30 million was spent by the
end of 1932 — and too late for Hoover, who lost the presidential
election to New York Governor Roosevelt.
In the early weeks of 1933, just prior to taking office, Roosevelt was
absorbed by the nation's banking crisis (see Chapter 4 for details).
But other administration officials brought the issue of relief to the
front burner — even those who weren't known for their zeal for
social issues.
"When we were campaigning," said FDR's crusty vice president,
John Nance "Cactus Jack" Garner, "we sort of made promises that
we would do something for the poorer kind of people, and I think
we have to do something for them."
Roosevelt agreed. Less than three weeks after taking office
in March, FDR asked Congress to create the office of Federal
Emergency Relief Administration (FERA) and to give it $500 million
to provide grants to states.
Some congressional Republicans were apoplectic at the idea. "I can
hardly find parliamentary language to describe the statement that
the states and cities cannot take care of conditions in which they
find themselves, but must come to the federal government for aid,"
said Senator Simeon D. Fess of Ohio. Representative Robert Luce
of Massachusetts declared, "[I]t is socialism. Whether it is
communism I do not know."
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Chapter 5: Coming Face to Face with Hard Times
Despite such bombastic indignation, the proposal easily passed
both houses by the end of April 1933. How well it worked is covered
in Chapter 13, along with other programs in Roosevelt's "New Deal."
ooks
The Arkansas "food riot"
On the cool and cloudy afternoon of January 3, 1931, Homer C. Coney decided he
had been patient long enough.
Coney, a 46-year-old father of five, grew corn and cotton on 41 acres he rented
nearthe central Arkansastown of England. A severe drought the previous summer
had ruined Coney and other farmers in the area, and with no government aid on the
horizon, his family was trying to make do on $12 a month from the Red Cross.
When a neighbor came by to beg, saying she and hertwo children hadn't eaten for
two days, Coney loaded up his truck with other men and drove into England. They
demanded food from Red Cross officials, who contended they lacked the necessary
application forms to issue anything.
"Our children are crying for food and we are going to get it," one farmer said.
"We're not beggars (but) we are not going to let ourfamilies starve!"
As the crowd swelled to several hundred, town merchants defused the situation by
opening their stores and providing food and clothing. A part-time reporter for the
Associated Press phoned in the story, dramatically — and erroneously — describ-
ing it as a "riot." But the exaggeration got the incident front-page play across
the country and triggered an outpouring of small donations: $25 from a Winder,
Georgia, manufacturing company; $5 from a man in Bridgeport, Connecticut; four
pairs of socks and shoes from a couple in El Paso, Texas.
The story also caught the attention of arguably the best-liked man in America in
1931. Homespun humorist Will Rogers was a star of stage, screen, and radio, and
he also wrote a nationally syndicated newspaper column. On January 7, he wrote,
"it took a little band of 500 simple country people . . .to come to a country town store
and demand food fortheir wives and children. They hit the hearts of the American
people more than all your Senatorial pleas and government investigations. Paul
Revere woke up Concord. These birds woke up America."
Rogers went to England, and then to the White House. After President Herbert
Hoover turned down his appeal for direct aid to the region, Rogers organized a
grueling 18-day, 50-showfundraising tour that raised more than $200,000. England
pulled through.
In August, Rogers noted in another column that the farmers of England had sent 13
truckloads of food to struggling coal miners in Oklahoma.
"Say, you talk about a people and a place being appreciative of what was done for
them when they was in trouble," Rogers wrote. "Now that's remembering, ain't it?"
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"JO Part II: Getting Depressed
Su/allou/ing pride to
DropB<Wgm*<m/%
|^ Americans allegiance to the tenets
of individualism and self-reliance
were never more evident than in the resistance of so many people
to accept relief when it was offered.
^NO/toj "We lived on bread and water for three weeks before I could make
3^$njv\ myself do it (accept relief)," a New Orleans man told a federal
(vTZ^Pj investigator in 1933. An unemployed schoolteacher in Texas told
V^C/ another investigator, "If I can't make a living, I'm just no good I
guess." In Pennsylvania, when an investigator asked a half-dozen
unemployed miners what the government could do for them, one
miner replied in broken English, "[WJork! Give man work, that's all,
no want relief if get work!"
Those who were less affected by the hard times, but who had been
raised on the same ideal of self-reliance, sometimes reacted as if
the country's problems were made worse by efforts to help the
poor and unemployed.
"To give a gratuity to an individual is divesting men and women of
their spirit, their self-reliance," said Patrick Jay Hurley, Hoover's
Secretary of War, in June 1932. "It is striking at the very foundation
of the system on which the nation is built."
Some of the down-and-out agreed. Frank Moorhead, a laid-off
magazine editor, wrote in a 1931 article in The Nation that to keep
up appearances, he set up an "office" in his home. There he would
type randomly for hours, so neighbors would think he was working.
"I should like to find out at what stage of your poverty other
people realize or sense it," he wrote. "I guess, after all, it's in the
droop of the shoulders, the look in your eyes — furtive, expectant,
resentful."
But for every Patrick Jay Hurley who seemed to consider poverty
a moral defect, or every Frank Moorhead who stigmatized himself,
there were others who saw the needy as neither more nor less
than the products of very hard times.
"Three or four million heads of families don't turn into tramps or
cheats overnight," wrote top Roosevelt aide Harry Hopkins in 1933.
"An eighth or tenth of the earning population does not change its
character, which has been generations in the moulding."
Chapter 5: Coming Face to Face with Hard Times "J /
Chanqinq With the Times
DropBojefe
ho were out of a job, and who were unwilling or
overnment help, created their own ways of making
a buck.
Tapping the entrepreneurial spirit
Some enterprises were offshoots of people's normal occupations.
Coal miners, for example, smuggled coal out of the mines in
lunch buckets or dug it out of company land after dark and
then sold it on the black market. These coal "bootleggers" even
formed an organization called the Independent Anthracite Miners
Association. The association's articles of incorporation stated
that "we must dig the coal out of these mountains as a means of
supplementing our measly income ... in order to keep the wolf
from our doorsteps."
Some people shined shoes: The New York Times reported counting
19 shoe shiners, ranging in age from 16 to 70, on one block of a
Manhattan street in the summer of 1932. Other people sold things
door to door: The Fuller Brush Company had so many salesmen —
strictly on commission — that it was one of the relatively few firms
in the 1930s to consistently make money.
Somewhat incongruously, given the hard times, people paid good
money to watch other people do strange things. For example,
boys climbed trees and tried to set endurance records for sitting
in them, while passersby dropped coins in a box. Sometimes the
tree sitters wore advertising for a local merchant. It apparently
paid better than one would think. The Literary Digest reported in
July 1933 that "the bank accounts of the numerous contestants . . .
are not to be dismissed with a shrug." To read about other wacky
things people did for money, see the nearby sidebar "Endurance
for sale."
Hundreds of men wandered into old gold and silver mining
regions in Colorado, Arizona, and California, looking as much
for something to do as for precious metals. "We were more like
scavengers," television journalist Eric Sevareid wrote in his 1946
memoir of being "on the bum" during the Great Depression. "The
hope of finding gold, which almost none of us ever did, was more
of an excuse to live in the hills, where life was cheap."
72 Part ": Getting Depressed
Dro
E
Endurance for sale
'K»a*K>&*hK XKUf had what 7Vme magazine referred to as an "appetite for
preposterous endurance." It was an appetite sated by the willingness of some
people to walk, dance, rollerskate, or bicycle for days and weeks on end in hopes
of winning some money.
While there were variations on the theme, the basic premise was that a promoter
invited individuals, couples, or teams to compete in activities ranging from kissing
to sitting in rocking chairs. The promoter sold tickets to people who wanted to
watch, and the contestants who lasted the longest at the activity won cash prizes.
Roller Derby winners could make $1,000 for first place. Marathon dancers might
average $20 to $30 a day in tips, and free meals, for as long as they could stay on
their feet.
In addition to prizesfor lasting the longest, competitors could also earn money from
the crowds for an especially good effort or for some extra form of entertainment,
such as singing. And there were often very big crowds. A Roller Derby held in
Chicago in late 1935 and early 1936 drew 10,000 people a day.
While they may sound like quaint versions of American Idol, the competitions could
be brutal. Bicycle races were usually six days long with competitors hurtling around
an oval wooden track hour after hour, occasionally at speeds approaching 30 mph.
Roller Derbies, on similar tracks, covered 4,000 miles. And dance marathons could
drag on for months. One critic labeled them "a macabre modern equivalent of a
homicidal Roman gladiatorial spectacle."
Of course, not everyone was there for the spectacle. As a New York City reporter
pointed out in 1933, a ticket to a six-day bicycle race cost $2.40, which was cheaper
than most accommodations in the city: "It insures a gent some shelter, warmth, a
bench and a certain amount of excitement if you like that sort of thing."
Making do With vOhat you had
An optimist in the 1930s might have pointed out that if half the
families in the United States were without income, it meant half
did have some money coming in. And it's true that many American
families didn't lose their homes, go on relief, or find themselves
rooting through their neighbors' garbage cans for food.
Even so, the shaky economy, the unsettled political climate, and
the shock of going from the seemingly shiny prosperity of the
1920s to the decidedly gloomy atmosphere of the 1930s all made
for a general feeling of uncertainty.
Chapter 5: Coming Face to Face with Hard Times
In that atmosphere, even people with incomes economized. Many
families planted gardens and did more canning and preserving
food. They made more of their own clothes. Telephones were
IfJJlefnTlrlj/s^frecessary: The number of phones in service nationally
Siropjrel Mwf20 million in 1930 to fewer than 17 million in 1933.
Automobiles remained a vital part of American life, but fewer of
the cars were new. In 1929, 4.4 million new cars were sold. In the
1930s, the annual number averaged 2.1 million. Book sales dropped
50 percent.
Getting sick was not an economically healthy thing to do. "You had
to have money to be sick," the novelist John Steinbeck recalled.
"Dentistry was out of the question, with the result that my teeth
went badly to pieces."
Some people dealt with the drooping economy by creating their
own economies. Barter systems — in which people traded goods
and services with each other — sprang up around the country.
Sometimes it was a straight swap: You fix my roof, and I'll give you
some of my backyard rutabagas. In larger systems, scrip was used
as a form of currency that could be exchanged for goods and services
from anyone who was part of the system. A Washington state
system used wooden nickels; a California system used seashells;
an Oregon system used "rubber checks" — made of rubber.
At their peak in the early to mid-1930s, barter systems probably
covered a million Americans in 30 states. A typical exchange,
described in a 1939 paper by California social economist Clark Kerr
(later chancellor of the University of California), worked like this:
A music teacher owed $200 to a doctor. The barter cooperative
she belonged to sent her three students, who paid her in scrip.
She used the scrip to pay the doctor, who used it to get maid and
stenographic services and new car tires from other members of
the cooperative.
The systems worked on a limited basis but were no substitute
for the real thing. As one observer put it, barter was "comparable
to the relief a starving dog might get by eating his own tail."
Takinq a Tatt an the
American Family
Toward the end of The Grapes of Wrath, John Steinbeck's
1939 novel about a family of migrant farmers during the Great
Depression, the family's patriarch is talking to his wife.
"J Part II: Getting Depressed
"I ain't no good any more," Pa Joad says. "Funny! Woman takin'
over the fambly. Woman sayin' we'll do this here, an' we'll go
even care.
— ^ ^ there. A<i' I don't ■
kroainq men's setf-tforth
A lot of Depression-era men could empathize with Pa Joad. Many,
if not most, men drew their self-esteem and authority as head of
the household from the fact that they were nearly always the sole
breadwinners in the family.
Having no job meant more than having no money. It meant a loss
of purpose and a diminution of the man's role in the family. Mom
did all the things that made the household function. Dad, if he
was unemployed, was apt to sit around the kitchen table and sink
deeper into depression.
That personal depression might deepen if Mom found a job, which
was not an easy task. The percentage of the workforce made up of
women increased only slightly from 1930 to 1940, from 24.3 percent
to 25.1 percent. (In contrast, the percentage was 46.5 percent in
2008.) Women were often discriminated against in the workplace
because of fears that they might usurp the rightful place of men.
Many employers who hired single women, including school districts,
would often fire them if they married working men and thus
created two-income families. There was a federal rule against two
people in the same family working for the government.
Women were most often hired because they would accept lower
pay — a practice not only allowed by federal law but also practiced
by the federal government in its relief and jobs programs. In
projects run by the federal Works Progress Administration, for
example, men were paid $5 a day and women $3.
Some families faced double whammies. A Eureka, California, woman
who worked at the county court house was married to a surveyor
who lost his job. Then she got pregnant and had to leave her
position. "I'm happy of course," she wrote First Lady Eleanor
Roosevelt in June 1934, seeking a government job for her husband,
"but Tommy is nearly out of his head. He has tried every conceivable
prospect, but you must know even pick and shovel jobs do not
exist ... A year is all I ask and after that I can go back to work and
we can work out our own salvation. But to have this baby come to a
home full of worry and despair, with no money for things it needs, it
is not fair. It needs and deserves a happy start in life."
Despite the extra pressures imposed on families by the economic
stresses of the period, divorce rates actually declined, dropping 20
Chapter 5: Coming Face to Face with Hard Times "] §
otten simply w.
OOKS
percent between 1929 and 1933. But that wasn't necessarily good
news. Men who saw themselves as failures because of unemployment
often simply walked away and didn't come back, a much cheaper
n a formal divorce.
Sometimes, as Figure 5-1 shows, the one thing that kept couples
together was having nothing else.
Figure 5-1: An evicted Los Angeles couple sits on the curb surrounded by their
belongings in 1937.
With the future so uncertain, marriage rates declined in the 1930s
for the first time in the United States since the early 19th century.
And birth rates dropped as well, from 25.1 per 1,000 population in
1925 to 19.4 in 1940.
Even that number was too high for some women. For example, a
Bakersfield, California, woman told federal investigator Lorena
Hickok in 1933 that she worried about getting pregnant but
couldn't afford contraceptives.
"I suppose you can say the easiest way would be not to do it," she
said. "(But) you don't know what it's like when your husband is
out of work. He's gloomy all the time and unhappy. You haven't
any money for movies or anything to take his mind off his troubles
You must try all the time to keep him from going crazy. And many
times — well, that is the only way."
/ 1 Part II: Getting Depressed
Hitting children the hardest
astii^disruptions caused by the Great Depression were
ayyfrantest on children, who had no concept of the economic
orces that had put life in such disarray.
Some families had no recourse but to commit their children to
orphanages or similar institutions. A veteran social worker told
a Senate Committee in 1933 that the number of children who had
been given up by their parents had risen from 284,000 in mid-1930
to 400,000 in October 1932.
"It is the belief of those familiar with the facts that this increase . . .
has been caused chiefly by the breaking up of family groups caught
in the Depression and unable to care for their children because of
inadequate relief or other conditions precipitated by unemployment,"
said Dr. Jacob Billikopf.
Newspapers routinely carried heart-wrenching stories of the
crushing weight borne by some children:
W In January 1933, an 8-year-old boy in Big Spring, Texas, told
a social worker who had come to his home that he felt it was
wrong to go out and play when he should be tending to his
father, who was ill with tuberculosis.
"No school for this boy," wrote a reporter for the Big Spring
Herald who had accompanied the social worker. "Only barely
enough food. A chilly damp little room in which to live. No
mother to care for him. Nothing in his days except to sit
beside his father and watch him die."
V New York City columnist Gilbert Swan noted in February 1933
that those without shelter in the city sometimes went to the
Central Park or Bronx zoo, where buildings were kept warm to
protect the animals.
"I happened by the other day when the animals were being
fed," Swan wrote. "Two puny, rickety, haggard youngsters
were tugging at the hands of a beaten-looking man. No words
passed. The children looked blankly at the food, and their
father. Obviously there was no bread for them."
*>* In Punxsutawney, Pennsylvania, in late 1933, a 15-year-old boy
named Thomas Colbert was suffering from a chronic kidney
disease. The illness had eaten the family's savings, and Alec
Colbert, Thomas's father, had lost his job as a mechanic. The
family had bought a small farm but lost it when they couldn't
pay the mortgage. According to a November 21 headline in the
Indiana (Pennsylvania) Evening Gazette, Thomas "Did Not Want
to Be Any Trouble to (His) Parents." So he poisoned himself.
Chapter 5: Coming Face to Face with Hard Times "J "J
DrdpBopflS
"flpar Prp<;irlpnt Rnn<;pw
want for Christmas . . .
Dear President Roosevelt,
Please help us my mother is sick three year and was in the hospital three month
and she came out but she is not better and my Father is peralised and can not work
and we are poor and the Cumunity fund gives us six dollars an we are six people
four children three boy 15, 13, 12 and one gril 10, and to parents. We have no one
to give us a Christmas presents, and if you wantto buy a Christmas present please
buy us a stove to do our cooking and to make good bread.
"Please excuse me for not writing it so well because the little girl 10 year old is
writing. Merry Christmas."
— Letter to the president from Warren, Ohio, dated December 22, 1935
Scraping By at the Bottom
of the Barret \
At just under 12 percent of the total population, minority groups
were definitely in the minority in the United States of the Great
Depression. The 1930 U.S. Census reported that 88.7 percent of the
populace identified themselves as "white," followed by 9.7 percent
"Negro," 1.2 percent "Mexican," and 0.3 percent American Indian.
(By contrast, the U.S. population was 33 percent minority in 2008.)
But despite being a relatively small slice of the American pie,
minority groups bore an inordinate amount of the Great Depression's
burdens. What follows is a look at how the three largest minority
groups fared during the 1930s.
African Americans
Most of the 11.9 million African Americans in the 1930s were
already poor when the Great Depression began, so they didn't feel
the jolt as sharply as the white community. But because they were
poorer to begin with, they did feel it more deeply.
About 80 percent of African Americans still lived in the South
during the decade, and half of those lived in or near small towns
in rural areas. Only 10 to 12 percent of those who farmed owned
their own land. Most were tenant farmers (farming on rented land)
or sharecroppers (growing crops on borrowed money, which was
7$ Part II: Getting Depressed
DropBaoks
repaid by giving up a percentage of the yield). And most were
economically crippled even worse than they had been when the
price oficotton dropped by more than half between 1929 and 1933.
ns in the rural South ranged from bad to appalling.
Fisk University sociologist Charles S. Johnson surveyed 916 black
rural families in the mid-1930s. He reported that only 53 of the
families had running water; 66 percent used "open privies," or pit
toilets, and 10 percent had no toilet at all. Only 2 percent had
electricity.
Lynchings, which had dropped to a post-Civil War low of 8 in 1932,
climbed to 28 in 1933, 15 in 1934, and 20 in 1935. And if lynching
wasn't uncommon, education for black children was: Some schools
for African Americans opened only when the weather was bad and
the students couldn't work.
About 400,000 African Americans left the rural South for Northern
cities during the 1930s, but things were only marginally better
there:
v0 In New York City's Harlem borough, the median annual
income for black families in the mid-1930s was $1,300. In
the white areas of the city, it was $1,750. Rents in Harlem,
meanwhile, averaged $160 a year higher.
In Cleveland, black families were twice as likely as white
families to have annual incomes of less than $500 a year.
In Chicago, African Americans made up just 4 percent of the
city's population but 16 percent of its unemployed.
Employers, many of whom had not been shy about having
discriminatory hiring practices before the economic plunge, now
were even less likely to hire a black person with so many unemployed
white people from which to choose. By the end of 1932, black
unemployment was estimated at 50 percent.
One small bright spot amid the hard times for African Americans
was that some white retailers became more polite to black
customers. "You know, this depression has made the great Anglo
Saxon easier to get along with," a black community leader wryly
noted. "He smiles and is very friendly at his gas stations and stores."
.jUBE/? But federal relief programs under FDR's administration were not
always so friendly. Federal programs designed to help raise the
price of cotton by paying landowners to plant fewer acres actually
made things worse for black farm laborers or tenant farmers,
because the landowners often pocketed all the subsidies while
providing less work.
Chapter 5: Coming Face to Face with Hard Times
wage levels toi
0©KS
Some of the federal job programs indirectly allowed African
Americans to be paid less than white workers by setting lower
wage levels for job classifications that were dominated by black
Still, the fact that they were included in federal programs at all made
many black voters leave the party of hero Abraham Lincoln — and
more to the point, Herbert Hoover — and join the party of FDR.
More black voters had backed Hoover than supported FDR in 1932.
In Roosevelt's reelection in 1936, however, 76 percent of African
Americans voted for him.
The shift of African Americans from GOP allegiance to Democratic
fealty continued through the rest of the 20th century and into the
21st, and black voters became one of the Democratic Party's most
reliable voting blocs.
For his part, Roosevelt was very careful not to be seen as "pro-Negro,"
to avoid irritating Southern members of Congress on whom he was
counting to help push through his economic recovery program.
In explaining why he could not back an anti-lynching bill in
1933, FDR told an executive of the National Association for the
Advancement of Colored People, "If I come out for the anti-lynching
bill now, they (Southern members of Congress) will block every bill
I ask Congress to pass to keep America from collapsing. I just can't
take that risk."
What FDR couldn't do because of politics, his wife Eleanor could
because of her humanity. The First Lady was outspoken in her
sympathies toward minorities and was roundly excoriated for it by
racists around the country.
"We must all learn to work together, all of us, regardless of race
or creed or color," Eleanor said in a 1934 speech on African
Americans and education. "We go ahead together or we go down
together."
Of course, then as now, not everyone felt the same way. U.S.
Senator Theodore G. Bilbo of Mississippi, for example, actu-
ally proposed spending $1 billion in 1939 to deport all African
Americans to the African country of Liberia.
But little by little, progress was made. In 1935, FDR issued an
executive order specifically prohibiting discrimination on new
federal public works projects. In 1937, he appointed the first
black federal judge in U.S. history. And in 1939, the U.S. Justice
Department created a Civil Rights section.
SO Part II: Getting Depressed
America's civil rights movement obviously had a long way to grow,
but its roots may have taken hold during the Great Depression.
DropBQQjfcS
The 1.4 million Latinos in the United States at the onset of
the Great Depression shared some of the problems of African
Americans — and had a few problems of their own.
^jjjjvBEs The overwhelming majority of Latinos were from Mexico, which
&/^1S\ had been exempt from the U.S. immigration restrictions of the
( ilO ) 1920s, mainly because growers in the southwestern United States
needed a source of cheap labor.
Many Latinos moved among the fields of Texas, Arizona, California,
and southern Colorado, although some moved to cities such as
Detroit and Chicago for manufacturing jobs. A Latino community in
Los Angeles had reached a population of 100,000 by 1930. There,
as elsewhere, Latinos were subject to strict segregation both in
housing and in public settings such as movie theaters.
When the U.S. economy hit the skids in late 1929, the Latino labor
supply became part of a labor glut, and Latinos became convenient
scapegoats. Texas Representative Martin Dies proclaimed that "the
large alien population is the basic cause of unemployment."
A committee appointed by President Hoover recommended that
the government toughen its immigration policies to reduce the
labor supply, and in September 1930 Hoover agreed. The president
invoked a provision in federal law that barred immigrants who
were likely to become "burdens to taxpayers." That move all but
closed the United States to immigration.
The feds also began clamping down on immigrants who were
deemed to be in the United States illegally. About 80,000 Latinos
were eventually rounded up by the Federal Bureau of Immigration
(which in 1933 became the Immigration and Naturalization Service)
and deported.
Latino farm laborers, meanwhile, faced a double dilemma. As the
Great Depression deepened, wages dropped. Pay in Colorado beet
fields dropped from $27 an acre in 1929 to $12.37 in 1932. Picking
100 pounds of cotton in Texas earned $1.28 in 1928; it earned 42
cents in 1931. At the same time, local government relief programs
and charitable aid began to be restricted to "citizens only," which
in most cases meant "whites only."
Chapter 5: Coming Face to Face with Hard Times $ /
Although most federal relief programs under the Roosevelt
administration were open to Latinos, the welcome mat had been
all but nulled. In 1937, Congress closed a major federal jobs
ipTjp^r\rl/oOliens." The ban extended to private companies with
NfmwnmeV^^jntracts. Not wanting to take a chance at losing a
contract, the companies often fired everyone that might fit the
"alien" description, whether or not they were U.S. citizens.
Faced with mounting hostility, many Latinos decided to leave. In
Los Angeles, county officials even offered to pay their train fares.
An observer described the departure of one train loaded with
repatriados, or repatriated Latinos: "The loading process began at
six o'clock in the morning. Repatriados arrived by the truckload —
men, women, children — with dogs, cats and goats; half-open
suit cases, rolls of bedding and lunch baskets." A punctilious
official estimated the county saved $347,468.41 in relief aid for the
$77,249.29 it spent on train fares.
Eventually, more than 300,000 Latinos, many of them U.S. citizens,
left for Mexico. Some of those who stayed attempted to protect
themselves by organizing their own unions, with mixed results.
Those efforts are covered in Chapter 11.
Native Americans
In the mid-1880s, the federal government came up with the idea
that the way to solve the country's "Indian problem" was to
"assimilate" them. That meant, among other things, allotting
parcels of land to individual Native Americans, shipping Indian
children off to white-run boarding schools to "help" them lose their
culture, and waiting for the Indians to forget about being Indians.
To help them along, Congress made all Native Americans U.S. citizens
in 1924, whether they wanted to be or not. (Some states didn't
want them to be; New Mexico and Arizona didn't let Indians vote
until 1948.)
In 1928, a Congress-commissioned study reported that the
assimilation idea was a dismal failure:
Half of Native Americans had lost the land that had been
allotted to them, either by selling it or losing it for nonpayment
of property taxes. By 1925, the 138 million acres given to
individual Indians was down to 48 million.
A shocking 96 percent of Native Americans had annual
incomes of less than $200.
82 Part ": Getting Depressed
i** Infant mortality rates for Native Americans were twice the
national average, and tuberculosis deaths were seven times
thq national average.
lJ^,nfre*Rfiosevelt administration pushed a bill through
Congress formally known as the Indian Reorganization Act (and
informally known as the "Indian New Deal"). The act restored
tribes' rights to own land collectively, reaffirmed their right to
self-government, and encouraged them to preserve their cultural
identities and traditions while expanding their business and
education opportunities.
In the dozen years after the act's passage, tribes reclaimed a total
of 4 million acres. But their overall economic lot did not improve,
and when World War II began, the federal government lost interest
in Native Americans again.
Lessons Learned
It took a descent into a swamp of joblessness, homelessness,
and hunger in the Great Depression before a safety net of social
services was woven that continues in place in the 21st century.
It also took the specter of economic disaster for women to break a
longstanding tradition and enter the workplace.
Here's a look at how the Great Depression helped spur the federal
government to take an active role in aiding people in need, and
how women have fared in the workplace since the 1930s.
WeaVinq a social services safety net
A host of 21st-century social service programs have their roots in
actions taken by the federal government in response to the Great
Depression. They include the following:
u0 Federal-State Unemployment Compensation: Created as part
of the Social Security Act of 1935, the program is administered
by individual states under federal guidelines. It's financed by
payroll taxes paid by employers. Almost anyone paid a salary
or hourly wage is covered. Most states pay a maximum of 26
weeks of benefits. An estimated 8 million people collected $35
billion in benefits in the 2008 fiscal year.
Chapter 5: Coming Face to Face with Hard Times
Temporary Assistance for Needy Families (TANF): Started in
July 1997, this program is a successor to Aid to Families with
■— ^ Dependent Children (AFDC, 1960), which in turn was spawned
J TO IJ O f%NPQDePendent Children (ADC, 1935). The program is
' K-' VreligVfcirto give families up to 60 months of benefits, the
levels of which vary from state to state. But it also requires
recipients to work at least part-time. About 3.8 million families
were participating in the program as of June 2008.
Housing Choice Voucher Program: This program sprang
from a 1937 law and is better known as "Section 8," after the
part of the law that dealt with the program. Under it, low-
income people pay a percentage (generally no more than 30
percent) of their income for rent. The federal government
pays the rest.
Supplemental Nutrition Assistance Program: Better known
as the "food stamp" program, it provides assistance in buying
food to low-income people. Until the late 1990s, recipients
were issued booklets of coupons, or "stamps," to exchange
for food. The coupons were phased out in favor of electronic
debit cards. The program, which served about 31.5 million
people in fall 2008, is the latest iteration of a program that
ran from 1939 to 1943. It was revived in 1961 and became a
permanent program in 1964.
Virtually all of these programs have been criticized, often with
justification, for faults ranging from arbitrary eligibility rules to
insufficient benefit levels. None of them have totally solved the
problems they're designed to address. For example, the federal
government estimated there were still 672,000 homeless people in
the country in 2007, and that estimate is probably low.
But all in all, if you asked someone in a 1933 bread line, he'd almost
certainly be glad to jump into a 21st-century social services safety
net, holes and all.
Paying Women What they're Worth
World War II tossed out the window many of the traditional
arguments about women going to work. Millions of women took
jobs left vacant by men in uniform. One thing that didn't change,
however, was the gender gap in wages: In 1944, women in war-
production factories received an average of $31.21 a week, while
men working in the same jobs were paid $54.65.
Part II: Getting Depressed
That gap remained relatively stable until the early 1960s, when
Congress passed the Equal Pay Act, which made it illegal to pay
men and women different wages for the same job. Between 1963
[aTW/2V«/[l©gender wage gap closed from women making 60
Iserseflt'oVfliKit men received to 77 percent.
Even so, according to U.S. census numbers, the gap was still
costing women from $400,000 to $2 million in lost wages over a
lifetime. In 2009, several bills to strengthen and close loopholes in
the 1963 law were pending in Congress.
In most recessions since World War II, women tended to lose their
jobs at a lesser rate than men did. But in the recession that began
in late 2007, the percentage of women becoming unemployed
was actually higher than the percentage of men. Median wages
for women also fell much farther (3 percent in 2007, compared
to 0.5 percent for men), according to a report by the U.S. Senate
Committee on Health, Education, Labor and Pensions.
Men or women still dominated certain jobs in the 2000s, just as
they did in the 1930s. For example, 91 percent of registered nurses
in 2007 were women, while 83 percent of industrial engineers were
men. But gender barriers had come down in scores of occupations,
and women filled jobs that few in the 1930s could have imagined
them in, such as firefighter, airline pilot, and Secretary of State.
Chapter 6
Dr°PBc*bles on the Farm
In This Chapter
Suffering before the Great Depression even started
Rebelling against the banks and the government
Getting paid not to farm
Taking it on the chin from Mother Nature
Lessons learned
1
M f one group of Americans was well-rehearsed for the onset
*J of the Great Depression in late 1929, it was the 29 million
people who lived on farms. That's because they had already been
punched and pummeled by economic forces throughout the 1920s.
In this chapter, I show how the already-dreary situation for U.S.
farmers got worse. I explain how some of them fought back and
how the federal government came up with a plan to make farmers'
lives better by paying them for not growing so much stuff.
The chapter ends with Mother Nature walloping farmers with
drought, dust, and bugs. It wasn't easy being a farmer in the Great
Depression.
Farmers' Pre-Depression
depression
Americans had a long tradition of idealizing farmers and farm life.
Thomas Jefferson referred to them as "the chosen people of God."
The 19th-century orator and statesman Daniel Webster declared
that farmers "are the foundation of civilization." And Theodore
Roosevelt insisted that "everything possible should be done to
better the economic condition of the farmer."
Part II: Getting Depressed
way to make a 1
300;KS:'
While such statements may have made farmers feel warm and
fuzzy, the truth was that farming had always been a very tough
way to make a living. It was heavily dependent on the uncontrollable
th nature and how much people were willing to pay
te and wore.
Getting a boost from
leather and WWl
But by the second decade of the 20th century, the stars seemed to
align themselves in favor of U.S. farmers. Rainfall was reliable, and
the weather generally cooperated. The outbreak of World War I in
1914 meant most European nations had to devote their attention
and resources to fighting instead of farming. As a result, demand
for U.S. exports of food and fiber soared.
The growth in demand came at the same time that technology was
improving everything from irrigation systems to egg incubators.
Particularly important were improvements in tractors that made
them smaller and more maneuverable. The number of motorized
farm vehicles tripled during and just after World War I.
The advent of tractors meant the demise of many horses and
mules that had previously been used to supply power to farm
machines. An estimated 9 million animals were destroyed in the
decade following World War I, and 25 million acres that had been
used to grow animal food were converted to grow people food.
The improved technology meant improved production, which,
combined with higher prices, resulted in more profit. For example,
in 1913 U.S. wheat farmers produced 751 million bushels on 52
million acres for a price of 79 cents a bushel. In 1919, the year after
the war's end, wheat farmers produced 952 million bushels on
73.7 million acres for $2.16 a bushel. Gross income for all U.S. farm
products rose from $7.9 billion in 1913 to $18 billion in 1919.
And as demand grew and prices rose, many farmers began
acquiring more land so they could make even more money. Farm
mortgage debt rose from $3.4 billion in 1910 to $6.7 billion in 1920
and more than $9 billion by 1925. It proved in most instances to be
a classic case of overreaching.
Chapter 6: Troubles on the Farm S7
DropB
Watching demand and prices fall
ippened to end the financial frolic on U.S. farms. The
'orld War I ended. Nations that had devoted most of
tTieirresources to the war began growing their own food and fibers
again, reducing the demand for U.S. products.
The second was that farmers did precisely the wrong thing in the
face of falling prices: They continued to overproduce, growing
more crops and animals than there was a market for, either abroad
or within the United States.
The result was that prices dropped precipitously. Wheat prices fell
from a high of $2.16 a bushel in 1919 to 93 cents a bushel in 1923.
Total farm income, which had reached $18 billion in 1919, was $6
billion a decade later. In 1929, the average per capita income of all
Americans was $750. For farmers, it was $273.
And then things really got bad. As the entire country slipped into
economic quicksand at the end of 1929, and being able to afford
food became an everyday struggle for millions of people, demand —
and prices — slipped sharply down:
Chicken farmers in Missouri earned as little as 3 cents a dozen
for eggs. Dairy farmers in Nebraska sold milk for as little as 2
cents a quart — when they could sell it at all.
C" Corn was so cheap, an Iowa school district offered to trade a
season ticket to high school basketball games for 600 pounds
of ear corn, but only if the corn was delivered.
V In January 1933, an Iowa farmer reportedly sent five calves
to the Chicago stockyards by rail. He got back a bill for $1.98:
The sales price hadn't covered the cost of shipping and feeding
them.
Total U.S. farm income, which had been at a lofty $18 billion in
1919, was $2 billion by 1932. Wheat prices, which had been $2.16 a
bushel in 1919, dropped to 38 cents in 1932. The average per-acre
value of farmland fell from $69.31 in 1920 to $29.68 in 1932. By the
mid-1930s, only 16 percent of U.S. farm families were making more
than $1,500 a year, which was the U.S. median family income. More
than half of farm families were making less than $1,000 a year.
S8 Part ": Getting Depressed
"We plan to live on our small income of $1 a week, besides $3.60
which we receive from the relief every week," a South Dakota farm
wife wrc^e a farming magazine in February 1935. She added ominously,
i don't work out, we won't need to make any more
While prices and income dropped, however, mortgage payments
and property taxes remained fixed. By 1933, 150,000 farms a year
were being foreclosed, more than 17,000 a year in Iowa alone. By
1934, federal officials estimated that 30 percent of the farms in the
northern and central states were owned by "creditors or government
agencies which have been compelled to take over the property."
It wasn't just a lack of income that made life difficult for families,
but also a lack of basic services and amenities. More than 1,300
rural counties had no general hospital. Nine of ten farm households
had no indoor toilet, and eight of ten had no electricity. Hundreds
of thousands of school-age children couldn't go to school because
they were needed to work on the farm, they lacked clothes or
shoes, or there was simply no school in their area.
Farm families in the Midwest burned cow manure for fuel, made
soup out of the thorny Russian thistle tumbleweed, and watched
their animals starve. On a visit to the Dakotas in 1933, federal
investigator Lorena Hickok reported the area had become "the
Siberia of the United States."
"A more hopeless place I never saw," she wrote. "Half the people —
the farmers particularly — are scared half to death . . . the rest of
the people are apathetic."
Sharecroppers: The Worst
of the Worst-off
As bad as things were in the Midwest and Great Plains states, they
were worse in the South. Drought conditions that plagued most
U.S. farming regions at various times throughout the 1930s started
in the South first, in 1930. That was just three years after devastating
floods in the region had covered vast areas, wiping out entire crops.
In addition, the Southern farmer was much more likely than farmers
elsewhere to be a tenant farmer or a sharecropper. About 75 percent
of farmers outside the South owned the land they farmed. In the
South, fewer than half did.
Tenant farmers ranked slightly above sharecroppers on the
socio-economic pyramid. Tenant farmers were renters who often
used their own equipment and kept the profits from their crops.
Chapter 6: Troubles on the Farm
DropB
Sharecroppers were often virtual slaves, or at best medieval-style
serfs. Landowners advanced money to the sharecroppers for seeds
and supplies. The sharecroppers planted and reaped, then turned
TrQf the crops to repay the debt, the rent on the land,
'equipment. Plus, landowners received a percentage
of whatever amount was left. That left the sharecropper with not
very much. A 1933 study of four Southern states found that the
average annual income for working sharecroppers was $350 for
white families and $294 for black families.
The sharecroppers' living conditions were for the most part
horrendous. A January 1933 story in The New York Times about
sharecroppers in Arkansas described them as living off lard, flour,
and salt pork given to them by the Red Cross. Their homes were
"shacks built of logs" and "dilapidated board houses."
"They have little furniture," the story related, "perhaps a bed, two
or three chairs and a stove in one room, and a rickety table and
stove in the kitchen. Many are less fortunate than this ... a lawyer
at Harrisburg told of visiting one family of five where all were living
in one room, sleeping on the floor and with a fireplace of mud."
After touring some Southern states in 1934, Secretary of Agriculture
Henry Wallace declared that "one third of the farmers of the United
States live under conditions which are so much worse than the
peasantry of Europe that the city people of the United States should
be thoroughly embarrassed."
Fumbling federal efforts to help
A few efforts were made at the federal level in the 1920s to help
the beleaguered farmer, none of them successful. Congress twice
passed bills that would have authorized the federal government to
buy excess crops at prices that reasonably reflected the farmers'
cost of production, and then either store the crops until market
prices rose or sell them to other countries for whatever they
would pay. But President Calvin Coolidge vetoed both bills on the
grounds that it was too expensive and that government should
stay out of the market.
When Herbert Hoover succeeded Coolidge as president in 1929,
one of his first efforts was to try to convince farmers to form
cooperatives where they could coordinate crop production with
each other. He also pushed a bill through Congress that created
the Federal Farm Board, which was authorized to buy surplus
crops and store them. But the cooperative thing never got going,
and the Farm Board rather quickly ran out of money and storage
space before it had much of an impact.
()0 Part II: Getting Depressed
Farmers, meanwhile, were fed up with the Feds. At a January 1933
hearing of the U.S. Senate's Committee on Agriculture, the president
of the Wisconsin Farmers' Union told senators, "I almost hate to
1 honestly believe that if some of them (farmers)
lanes, they would come down here to Washington
and blow you fellows up."
John Simpson, the president of the National Farmers Union,
echoed the sentiment. "The biggest and finest crop of revolutions
you ever saw is sprouting all over the country right now," he
warned.
Fiqhtinq-Mad Farmers
As early as 1927, farmers in the Missouri River Valley in western
Iowa and eastern Nebraska had talked about a strike. Following
the veto by President Calvin Coolidge of a bill that would have
had the federal government buy surplus crops, a group of farmers
calling themselves the Corn Belt Committee drafted a resolution
that stated in part, "if we cannot obtain justice by legislation, the
time will have arrived when no other course remains than organized
refusal to deliver the production of the farms at less than production
costs."
What the committee wanted was "parity," which they defined as
crop and livestock prices that covered the cost of production and
transportation, plus a "reasonable" profit of 5.25 percent. But the
architects of the idea received little support for the idea of a
farmers' strike until 1932.
By then, the gap between "parity" prices and real-world prices was
enormous. The parity price of corn was estimated at 92 cents a
bushel; of hogs, $11.25; and of butterfat, 62 cents a pound. The real
prices were 32 cents a bushel for corn, $3.85 for hogs, and 18 cents
for a pound of butterfat. Meanwhile, the number of farms being
foreclosed because farmers could not pay their mortgages or taxes
was rising weekly.
Cattina for a "holiday"
In May 1932, about 1,300 farmers met in Des Moines, Iowa, and
formed the Farmers' Holiday Association. The "Holiday" part was
borrowed from a practice banks used to avoid mass withdrawals:
When a run on the bank began, the banker would declare a
"holiday" and simply keep the doors locked until things cooled off.
Chapter 6: Troubles on the Farm /
^ prices, and pre
Drop3o„aEs
What the farmers proposed to do was simple: refuse to deliver
their crops and animals to market until they received fixed and fair
nd prevent anyone else from delivering their products.
e farmer production costs," the group's leader,
Milo Reno, said in a radio address, "and he will pay his grocer,
the grocer will pay the wholesaler, the wholesaler will pay the
manufacturer, and the manufacturer will be able to meet his
obligations at the bank. Restore the farmers' purchasing power,
and you have re-established an endless chain of prosperity and
happiness in the country."
The chances of a farmers' strike succeeding were pretty much zero
from the start. For one thing, they were badly organized and never
attracted a large enough following to have a major impact. Many
farmers simply could not afford to withhold their crops, even if the
prices they were paid were miniscule. Families and livestock had
to be fed. In addition, many farmers were suspicious of anything
that smacked of communism (and indeed, communists did try to
gain a foothold in the association).
It was also extremely difficult to actually block all the possible
ways to get to all the markets that existed. But that didn't stop the
group from trying.
Facing the farmers in the road
The striking farmers used spiked logs and cables to block roads
into towns that had agricultural markets. Cars were allowed to
proceed; trucks with produce, grain, livestock, or dairy products
were turned away, sometimes with a bit of force applied by club-
wielding farmers. Local police, who were badly outnumbered (and
sometimes sympathetic to the cause), couldn't do much, and so
the strikers got bolder.
Lawyers for mortgage-holding companies were kidnapped, bankers
bullied, and aggressive lawmen disarmed. After several strikers in
Council Bluffs, Iowa, were arrested, a mob of 1,000 men marched
into town and freed them. In Wisconsin, two cheese factories were
bombed, and scores more closed temporarily in fear.
In late April 1933 in Le Mars, Iowa, a district court judge named
Charles C. Bradley was dragged from his courthouse by a mob of
600 farmers. The judge was roughed up, and a rope was put around
his neck. After he refused to promise to stop hearing foreclosure
cases, the mob clapped a grease-filled hubcap on his head,
removed his pants, and left him standing in the middle of the road.
Part II: Getting Depressed
The strikers even had a song: "Let's call a farmer's holiday/A
holiday let's hold/We'll eat our wheat and ham and eggs/And let
gold."
a rationalization for their actions, which was that
they were following American tradition. "They say blockading
the road's illegal," a striker told a reporter for Harper's Magazine.
"I says 'seems to me there was a tea party in Boston that was
illegal too.'"
Holding "penny" auctions
The striking farmers had another tactic that was actually more
effective than the roadblocks, at least in terms of actual results:
They would sabotage foreclosure auctions. Sometimes doing so
involved forcibly blocking the sheriff and auctioneer from starting
the auction at all, and sometimes it meant bullying the mortgage
holder into rethinking the foreclosure.
At one Iowa auction, farmers pushed their way through a police
line, forced the mortgagor to forget about foreclosing, and then
made the mortgagor and each of the cops kneel and kiss the
American flag.
In slightly more subtle cases, the Holiday farmers would conduct
"penny" auctions. Someone would bid a penny or other small
amount for a piece of farm equipment being auctioned, and it was
made clear that no one else was welcome to bid. After everything
had been sold, the mortgage holder was prodded into accepting
whatever pittance had been raised and relinquishing the deed,
which was then turned over to the farm's owner.
For example, at an October 1932 foreclosure sale of a Nebraska
widow's farm, 2,500 of her "neighbors" showed up. Her cows sold
for 35 cents each, her disc plow for 25 cents, and her six horses
for a total of $5.60. When it was over, everything had been sold for
a bit over $100. The banker grudgingly turned over the $442
mortgage for the $100, and the widow was given back the farm
and all its assets.
Catching Washington's attention
Just as the roadblocks failed to raise crop prices, the penny auctions
didn't in themselves make a significant dent in foreclosure sales.
But both kinds of actions did make a significant impression on the
region's politicians and got the attention of people in Washington, D.C.
Chapter 6: Troubles on the Farm
North Dakota Governor William "Wild Bill" Langer advised farmers
during his 1932 election campaign to "shoot the banker if he comes
^ on your.farm. Treat him like a chicken thief." (Langer later imposed
J 1T\ fa^W6"fc-lj/e^mbargo on North Dakota wheat, prohibiting wheat
I V/ Ks ViiCnVjreli^^^iped out of the state until prices rose.) Iowa legislators
passed a law in February 1933 that put a foreclosure moratorium
on all mortgages that were not yet delinquent. Eight other states
followed with similar laws.
The Holiday group also got the attention of the national media.
In The New Republic in August 1932, journalist Donald R. Murphy
wrote that the strike was "a significant symptom of the state of
mind of a great conservative class which has borne depression for
twelve years and which is finally ready to employ radical measures
that seem to give it a chance to save itself from general bankruptcy."
After the election of Franklin D. Roosevelt in November 1932, the
striking farmers took a wait-and-see stance and halted most of
their road blocking and auction hijacking. Roosevelt and Congress
quickly pushed through several bills designed to provide relief to
farmers (covered in this chapter's next section).
Milo Reno
Depending on your point of view, Milo Reno was either a charismatic prophet or a
demagogic rabble-rouser. Either way, he kept things lively in America'sfarm coun-
try during the Great Depression.
Reno was born in Iowa in 1866, the 12th of 13 children of a farm family. Pushed by
his mother, he attended college in Iowa, where he studied theology. After a career
as a farmer and part-time preacher, Reno joined the newly formed Iowa Farmers'
Union in 1918. Within three years, he was union president and also ran two of the
union's three insurance companies.
As founder, president, and chief instigator of the Farmers' Holiday Association,
Reno was a tireless orator and organizer. Tall and thin-lipped, with a shock of bushy
hair and a fondness for oversized cowboy hats, Reno became something of a media
darling for several years during the 1930s. Time magazine described him as both
"indefatigable" and "a bad weather bird" who showed up wherever there was
dissension.
But as the Roosevelt administration's farm relief efforts took hold, Reno's fiery rhet-
oric became less interesting. He became a staunch FDR-hater and began champi-
oning the formation of a third major political party in time for the 1936 presidential
race. Like the farmers' strike, the third-party idea failed to catch on. Reno died of a
heart attack in 1936 at the age of 70.
Part II: Getting Depressed
The federal government's efforts weren't enough for some of the
Holiday Association, including its president, Milo Reno. Reno
^ wanted ihe government to guarantee set prices for farm products
| ]ff \ 1T\ <aTyYs"?jt l^its on how much farmers could produce. "We were
I >J KS edVVew deal by which agriculture would receive the same
consideration as others," Reno complained. "Instead, we have the
same old stacked deck."
But others thought the Roosevelt plan was a fair start. "We don't
care if Milo Reno does say that you shouldn't touch any of that
(federal) money," the Le Mars (Iowa) Sentinel editorialized. "When
you get a chance to get Uncle Sam's check for anywhere from $300
to $1,000 and even more, there's something wrong with you if you
don't take it."
By the end of 1933, the farmers' strike was all but over. But it had
served to shine the national spotlight on the plight of American
farmers, and helped spur efforts to ease their burdens.
Paying Farmers Not to Farm
Within weeks of taking office in March 1933, President Roosevelt
began pushing for a program to aid farmers. In May, FDR signed
the Emergency Farm Mortgage Act, which provided $200 million
for refinancing mortgages for farmers facing foreclosure.
He also signed the Agricultural Adjustment Act (AAA), which
created the Agricultural Adjustment Administration, as well
as doing some pretty interesting adjusting to U.S. agriculture.
Previous efforts to deal with farm overproduction had centered
on taking farm product surpluses off the market and storing them.
Roosevelt favored a different approach: not growing or raising the
surplus products in the first place.
That's exactly what the AAA did. Farmers who agreed to plant at
least one-third fewer acres or raise at least one-third fewer animals
were paid by the federal government for the ungrown or unraised
products. The price was set at or near prices for the products that
were actually grown or raised. Money to fund the program was
raised by imposing a tax on food processors, which in turn slightly
raised consumer prices. Other AAA elements came to include price
supports for rice, fruit, peanuts, and milk. Another $2 billion was
set aside for providing mortgage aid to farmers looking to refinance
their loans.
Chapter 6: Troubles on the Farm
A program run through the federal Commodity Credit Corporation
further supplemented the act. The program allowed farmers to
obtain lpans from the federal government in return for agreeing to
| \ 1T\ <§!k|£\aj(GOheir crops. If market prices rose, the farmer could
I >/ k-/ I— ' S«;mimluV^i«)ps, sell them, and repay the loan. If prices didn't
rise, the farmer could keep the loan and the Feds would keep the
crop. By 1940, the federal government was storing more than $500
million worth of unwanted cotton, wheat, and corn.
Pumping money into the economy
In addition, the AAA authorized as much as $3 billion in new currency
to be added to the U.S. monetary system. The idea was to "reflate"
the economy because the more money there is in the system,
the easier it generally is to get some of it. Prices can therefore
be raised without putting goods and services out of the reach of
consumers. By raising prices, farmers could more easily pay their
mortgages and taxes, countering the deflation (drop in prices and
consumption) that had plagued them for years.
An example: Farmer Jones got $2.19 a bushel for his wheat in 1919
and had mortgage payments of $50 a month. In 1932, wheat fell to
38 cents a bushel but the mortgage was still $50 a month. But with
more money in the system, wheat prices rose to 69 cents in 1934,
while the mortgage stayed at $50.
The act was certainly ambitious enough to draw plenty of criticism.
Food processors hated it because of the tax it imposed on them.
Mortgage lenders and people with lots of money hated the idea of
more money being pumped into the economy because it meant the
money they already had was less rare and, therefore, worth less.
Even some farmers were skeptical. "The way I figure it, we've got
to pay this money back some day," an Iowa farmer told a touring
reporter from the Syracuse (New York) Herald about a year after
the act was in place. "The money I got for hogs and corn I didn't
have to raise was a life-saver . . . but there is no reason to it I can
see. The agents tell me I do not understand economics. Well,
maybe I don't, but I wonder if they understand farming."
But like many of FDR's programs, most people were willing to give
it a try and see if it would help the farmer. BusinessWeek magazine
editorialized, "It might seem important to us to preserve in our
country the one large class of property owners, the greatest body
of entrepreneurs, the one stable and rooted element. It might seem
worth a high cost — and it might be cheaper than to add them
(farmers) to the breadlines of the cities."
96
Part II: Getting Depressed
Finding a glitch and
the AAA
e7Tgnculraral Adjustment Act contained both a politically
embarrassing glitch and a cruelly devastating flaw.
"CTJhe slaughter of innocents"
The glitch was that FDR didn't get the bill from Congress and sign
it until May 12, 1933. That turned out to be well after Southern
farmers had planted their cotton crops and the spring litters of
hogs had been born in the Midwest.
To reduce surpluses right away and get money to the farmers
quickly, the farmers were persuaded to plow up 10 million acres
of cotton and destroy 200,000 sows and 6 million piglets. All that
potential clothing material and pork chops going to waste was a bit
much to swallow for millions of hungry and ill-clothed Americans.
The noted defense and civil rights attorney Clarence Darrow
proclaimed it a crime to "kill little pigs and throw them out on the
prairies to decay while millions are hungry." Newspaper columnists
labeled it "the slaughter of the innocents." Even Secretary of
Agriculture Henry Wallace acknowledged it was "a shocking
commentary on our civilization."
By October, an embarrassed government formed the Federal
Surplus Relief Corporation, which diverted excess farm products
to state and local relief agencies. Harder to fix, however, was the
plight of the tenant farmer and sharecropper because of the AAA.
The greedy stiff the needy
The flaw was in the way the Agricultural Adjustment Act dealt with
tenant farmers and sharecroppers, the farmers who most needed
help. Because subsidies from the AAA were based on the amount
of land a farmer owned, farmers who rented their land were left
out in the cold. The act did call for landowners to share their
federal loot with their tenant farmers and sharecroppers, but it
relied on the landowner to pass on the money, and very few did.
Instead, many landowners either withdrew rental farmland from
production or used the federal money to buy tractors and hire
day laborers to work the fields. Either way, the tenant farmers and
sharecroppers and their families were often out on their ears.
Chapter 6: Troubles on the Farm
j^jftBEs They found themselves with no place to go. Some tenant farmers
(both white and black) in Arkansas organized a union in 1933 to
try to gat a share of the federal money. Beatings and whippings
15\|5\rfcrfii^i by landowners ended that effort. Congress passed
tofoNsnll, \ft^;o resettle displaced tenant farmers and the other to
help them buy land. Neither worked very well. And the Roosevelt
administration was hesitant to fix the problem for fear it would
alienate Southern members of Congress whose votes were needed
for New Deal programs to gain approval.
The result was that tens of thousands of the poorest farmers
took to the road, many heading for the promise of a paradise in
California. Whether that effort worked out for them is covered in
Chapter 8.
Retiampinq the AAA
Coupled with a severe and persistent drought that decimated
crops (which I cover in the next section) and reduced supplies, the
Agricultural Adjustment Act did help raise farm prices and farm
income. Wheat rose from 32 cents a bushel in 1932 to 69 cents in
1934, 92 cents in 1936, and $1.24 in 1937. Cotton, which had sold
for about 6 cents a pound in 1932, averaged between 10 cents and
13 cents in the next four years. Gross farm income rose 50 percent
between 1933 and 1936.
In 1936, however, the U.S. Supreme Court declared the act
unconstitutional on the grounds that "Congress has no power to
enforce its command on the farmer to the ends sought by" the act,
and that the processing tax it contained was also illegal.
Roosevelt quickly countered the court's decision with the Soil
Conservation and Domestic Allotment Act, which paid farmers to
conserve soil by following the natural contours of the land (contour
farming) rather than straight rows. It also provided funds for
planting beans, clove, and other crops that renewed the soil. This
time, the money came from the federal government's general
operating budget and not a specific tax.
In 1937, another bill was approved that allowed the Secretary of
Agriculture to set acreage limits for staple crops in order to stem
surpluses. It had limited success, and farm surpluses continued
until World War II came along.
ty$ Part ": Getting Depressed
Throughout the rest of the Great Depression, the Roosevelt
administration continued to tinker with farm legislation. "(It) is in
the nature of an experiment," Roosevelt told reporters. "We all
L^tl^. My position toward farm legislation is that we
I ck*e«mething to increase the value of farm products, and
if the darn thing doesn't work, we can say so quite frankly, but at
least try it."
Drought and Oust
On April 15, 1935, newspapers around the country carried a story
written by Associated Press reporter Robert Geiger from a town
called Guymon, Oklahoma.
a^ordj. It began: "Three little words — achingly familiar on a Western
farmer's tongue — rule life today in the dust bowl of the continent:
'If it rains.' Ask any farmer, any merchant, any banker, and you
hear them: 'If it rains.'"
Geiger used the term "dust bowl" to describe a specific geographic
region: the western third of Kansas, southeastern Colorado, the
Oklahoma panhandle, the northeastern two-thirds of the Texas
panhandle, and northeastern New Mexico. But the phrase caught
on. It was capitalized for emphasis and became the catchall term
for what was the worst environmental and agricultural disaster in
U.S. history.
The disaster began with the plow and the high price of wheat. For
centuries, the Great Plains had been covered with hardy buffalo
grass. The region had a semi-arid climate but was suitable for
grazing animals. In the last part of the 19th century and first part of
the 20th, however, people began ripping up the buffalo grass and
replacing it with wheat.
In good years, with plenty of rain, the result was bumper crops.
But in 1930, the rain stopped coming to much of the country's
midsection. The next year saw a return to near normalcy, but in
1932 precipitation dropped precipitously. By 1934, the drought
had spread to cover 75 percent of the country. At least 27 states
were severely affected.
Peaks at the southern end of the Rocky Mountains received no
snow in the winter of 1933-34. In parts of the Midwest, the top
three feet of earth contained no detectable moisture. Between June
1933 and May 1934, almost no rain at all fell on the southern Great
Plains.
Chapter 6: Troubles on the Farm
The drought — which lasted in some areas through 1936 — was
accompanied by blistering heat in the summers. On July 24, 1933,
^ temperatures reached 117 degrees in Vinita, Oklahoma; 109 in
J YC\ V\ n (OW^Lrt;,©ska; and 112 in Independence, Kansas. In 1936, parts
L-/ I \J VJ I— ' >^w%mer\K«msas had 60 straight days of temperatures of 100
degrees or more.
RooseVeit, the rainmaker
In August 1934, President Roosevelt toured drought-stricken areas
of Minnesota and North Dakota. "It is a problem," Roosevelt
understated to a crowd in Devils Lake, North Dakota. "I would not
try to fool you by saying we know the solution of it . . . when I came
out on the (train) platform this morning, I saw a rather dark cloud.
I said to myself 'maybe it is going to rain.' Well it didn't. All I can
say is, I hope to goodness it is going to rain, good and plenty."
And it did rain, although not "good and plenty." After the presidential
train left, The New York Times reported, "the rain cut a path about
100 miles wide . . . with the heaviest fall in the cities the presidential
train visited. In each case the showers came about seven hours
after the (president) had departed."
But even Roosevelt couldn't be everywhere at once. Some
communities in Kansas listened to pitches from salesmen with
machines that could make it rain — they said. But, The New York
Times reported, "thirty years ago, Kansas invested in rain-making
machines which failed, and they are skittish of the new apparatuses."
In Mitchell, South Dakota, people turned to prayer. At 1 1 a.m. on
July 10, 1936, with the temperature hovering at 104 degrees (the
eighth straight day over 100), the town's 13 church towers began
tolling their bells. Eleven thousand people fell to their knees and
prayed for rain. It didn't work.
A plague of grasshoppers
One creature — make that billions of creatures — that loved the
heat and aridity were grasshoppers. Encouraged to breed often by
the dry conditions, grasshoppers proliferated across the northern
Great Plains during the early and mid-1930s. In 1933, entomologists
estimated grasshopper infestations covered 75 percent of South
Dakota, with the insects laying as many as 5,000 to 10,000 eggs per
square foot in some areas.
/ 00 Part II: Getting Depressed
4i^=^ "The sun was shining brightly when we left home," a South Dakota
woman wrote in 1933. "When we were about halfway, it just turned
dark. It »vas grasshoppers, blocking the sun."
'The only
such massive numbers that they stacked up four
inches deep in streets, making cars skid as if they were on ice. It
was reported that trains sometimes could not get traction on the
track rails because they were covered with grasshoppers.
And they ate virtually everything: grain, vegetables, clothes left
hanging out to dry, even the corks out of water jugs. A Nebraska
woman in 1936 reported that her 5-year-old daughter left a doll
outside, and the grasshoppers ate it.
To cope, farmers tried mixing bran, molasses, and arsenic and
spreading it on the edges of fields. The grasshoppers ate it with
enthusiasm, even consuming the abdomens of their poisoned
comrades. The Aberdeen (South Dakota) News suggested farmers
employ ring-necked pheasants, which were regarded by many
farmers as a grain-eating pest in their own right, to gobble the
grasshoppers. "Pheasants will utterly ignore grains as long as there
is an abundance of insects," the paper advised.
Neither the poison nor the birds put much of a dent in the hordes
of 'hoppers. It would take a return to more normal weather
conditions to do that, and there wasn't much farmers could do
about the weather.
Mountains of dust
On May 11, 1934, the captain of a German liner reported that the
ship was late reaching port in New York City because of "a peculiar
atmospheric cloudiness" it encountered while off the East Coast of
the United States.
What the ship had run into was the middle of the United States, or
at least part of it, in the form of dust. The dust — an estimated 300
million tons of it — had been picked up by strong northwest winds
from the parched Great Plains and swept across the Mississippi
River. It stretched from St. Paul, Minnesota, in the north to
Nashville, Tennessee, in the south, reached heights of 15,000 feet,
and was still so thick when it reached New York that pedestrians
could not see the tops of the city's skyscrapers.
"The explanation of the dust cloud is simple," U.S. Weather Service
meteorologist James H. Kimball told The New York Times. "The
surface soil in the Upper Missouri and Mississippi valleys was fine
and loose as a result of the drought. All that was needed was a
persistent and direct wind."
Chapter 6: Troubles on the Farm / Q /
From 1934 to 1938, big and small dust storms swirled through
and out of the nation's midsection. They occurred most often in
summes, although "brown snow storms" were not unheard of in
e"J\ Md@iile persistent, the winds were not always predictable.
"If the wind blew one way, here came the dark dust from Oklahoma,"
a Texas farmer contended in 1934. "Another way, and it was the gray
dust from Kansas. Still another way, the brown dust from Colorado
and New Mexico."
The statistics generated by the dust storms were stunning:
Federal officials reported in late 1934 that the storms had
wreaked havoc across 1,400 counties in 22 states.
V The 1934 Yearbook on Agriculture calculated that 225 million
acres of farmland had either lost their topsoil or were in the
process of losing it.
The Department of Agriculture estimated that 19 million bushels
of wheat were lost in one week to a dust storm in mid-1934.
Photographs of the storms, such as in Figure 6-1, inspired awe and
dread in those who had never seen a dust storm in person. For
those who encountered them all too frequently, it was an experience
that was simultaneously familiar and terrifying.
Figure 6-1: A 1937 dust storm in Colorado caused total darkness that lasted for
about a half hour.
/ 02 Part ll: Getting Depressed
A South Dakota observer described a 1933 storm this way: "By
noon it was blacker than night, because one can see through night,
and this was an opaque black. It was a wall of dust one's eyes
ic?|jl?TYl<fp©etrate, but it could penetrate the eyes, ears and nose.
S^mirolpenwate to the lungs until one coughed up black."
The dust was a killer. A 6-year-old boy walking home from school
near Hays, Kansas, got lost in a dust storm, became tangled in a
barbed wire fence, and suffocated. Six people died in a Colorado
storm that lasted nearly a week. Infant mortality rates were sharply
higher in Dust Bowl states.
Life's little chores became teeth-grinding labor. Dishes had to be
washed before meals to get the dust off. Liquids had to be stored
in jars, and holes punched in the lids for straws, to keep the dust
out. Meat was fried at the highest temperatures possible so that
hot air rising from it would keep the dust from settling.
"Wearing our shade hats, with handkerchiefs tied over our faces
and Vaseline in our nostrils, we have been trying to rescue our
home from the accumulations of wind-blown dust which penetrates
wherever air can go," an Oklahoma woman wrote a friend in June
1935. "It is an almost hopeless task, for there is rarely a day when
the dust clouds do not roll over."
Federal government efforts to help were substantial. In 1934,
Roosevelt signed a bill that authorized him to establish grazing
rights over 140 million acres of federal land, with oversight by
the Department of Interior to ensure the land wasn't overgrazed.
The government spent $85 million between 1934 and 1936 to buy
ruined farmland and try to rehabilitate it. It also bought cattle in
drought areas, destroyed those that were in such bad shape they
couldn't be eaten, and distributed the meat from the rest to needy
families.
^jtOHf^ And in 1935, Congress established the Soil Conservation Service
yp~?r!\ (SCS) to teach and promote farming methods that preserved
v y^Wj topsoil. The SCS encouraged farmers to form conservation districts
xsE^ to oversee soil conservation practices among themselves. Many of
the districts continued to operate into the 21st century.
Combined, the programs resulted in an estimated 65 percent
reduction in the amount of soil being blown by the winds. And in
1939, the rains came back.
Chapter 6: Troubles on the Farm
Dro
Laughing away the Dust Bowl blues
Irrs^ja? Dust Bowl residents tried to top each other with tall tales
and tongue-in-cheek observations about the dust storms. "My uncle should be
along soon," went one line, "because I just saw his farm go by." There was the
story of the pilot who had to bail out over Amarillo: "It took him six hours to shovel
his way back to earth." Or the fellow who was hit by a drop of water and fainted:
"Ittooktwo buckets of dust to revive him." And then there was the Kansas woman
who, when asked by a reporter how bad the latest storm had been, replied "Lady
Godiva could have ridden through it without even her horse seeing her."
Lessons Learned
The Great Depression radically changed the relationship between
the American farmer and the federal government. Here's a look
at how government has redefined its role in agriculture since the
1930s, and how it handles surplus food and the poor.
The farmer and the Feds
Prior to the 1930s, the federal government rarely intervened in
the agricultural economy. But since passage of the Agricultural
Adjustment Act (AAA) in 1933, there have been at least a dozen
major bills approved by Congress and signed by the president that
deal with providing some form of financial aid to farmers.
Until the mid-1960s, major farm legislation was similar to 1933's
AAA. The bills committed the federal government to guaranteeing
prices on farm products and paid farmers not to plant or raise
more than the market could buy. But in 1965, Congress began
providing some direct income support to farmers that wasn't tied
directly to how much they did or didn't grow. The idea was that
surplus products could be sold to expanding markets in other
countries. In 1977, "farm bills" began to include non-farm elements,
such as nutrition assistance programs like food stamps.
^TiMfj In 1996, the "Freedom to Farm" bill cut any remaining ties between
federal payments to farmers and surplus production. One result
L^vA/ was tnat surplus U.S. farm products began to swamp some world
\dsL>' markets, undercutting farmers in other countries.
/ 01} Part ll: Getting Depressed
Dro
rvRi
I^\km^ Va'iJ^fekVtiaiJ the "disappearing American farmer," they're not kidding.
Consider this:
. What's new on the farm?
Fewer farm families: About 24 percent of the U.S. population lived on farms in
1930. The number was 2 percent in 2008. The number of farms during that same
period dropped from 6.8 million to 2.1 million.
Fewer farm workers: About 21.5 percent of working Americans made their
living on farms in 1930, producing 7.7 percent of the country's gross domestic
product (GDP). In 2000, only 1.9 percent of the U.S. workforce worked on farms,
producing 0.7 percent of the GDP.
v0 Less reliance on farm income: In 1930, about 30 percent of farm families had
income from work off the farm. In 2002, 93 percent had off-farm income.
In 2008, Congress passed a $300 billion farm package, overriding
the veto of President George W. Bush. The 673-page bill included
$200 billion for nutritional assistance programs, $43 billion for
subsidies to farmers, $30 billion for crop insurance programs, and
$27 billion for conservation efforts.
While only about 25 percent of U.S. farms received subsidies in
2008, the program has been routinely criticized over the years for
doling out taxpayer money to rich "farmers" that include foreign
corporations and farm owners who rarely set foot on their farms.
The 2008 bill, for example, "limited" subsidies to those who made
less than $750,000 a year in farm income and less than $500,000 a
year in non-farm income.
The definition of "farm relief" has come a long way since the Great
Depression.
Feeding the poor
In 1933, the federal government suffered a public relations black
eye when it convinced farmers to destroy 6 million piglets and
10 million acres of cotton to reduce surpluses. So the Roosevelt
administration set up the Federal Surplus Relief Corporation,
which eventually became the Federal Surplus Commodity
Corporation, which eventually became the Surplus Marketing
Administration, which eventually became the Emergency Food
Assistance Program run by the U.S. Department of Agriculture.
Chapter 6: Troubles on the Farm / Q§
^ ^ them toipeople
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1
Whatever it was called, the program's purpose was to take surplus
farm products the government had bought from farmers and give
them toipeople in need — through food banks, soup kitchens, and
ion centers.
The system works okay when U.S. farmers have a surplus of com-
modities to sell. But when farmers have domestic and foreign mar-
kets for everything they produce, there is no surplus. In 2003, for
example, the Feds provided $242 million in surplus commodities;
in 2007 it was only $59 million.
In 2009, the program was expected to supply $92.6 million in sur-
plus commodities. An additional $250 million for food assistance
was included in the 2008 farm bill, along with a program that sup-
plies monthly food boxes to needy Americans.
/ 00 Part ll: Getting Depressed
DropBooks
Chapter 7
oves Company: How
the Rest of the World Fared
In This Chapter
Paying the price of World War I
Getting off the gold standard
Touring the world of the Great Depression
Charting the course of dictatorships
Lessons learned
7 he United States didn't have a monopoly on suffering during
the Great Depression. In fact, very few countries escaped hard
times.
This chapter begins with an explanation of how post-World War I
desires for revenge and debt repayment played important roles
in bringing about the Great Depression, as well as what role the
gold standard had in the whole mess. I then offer some snapshots
of how various countries and continents fared during the period.
Finally, I look at how the Great Depression was handled in countries
run by some of history's nastiest people.
Tallying the Costs of War
In his memoirs, published in 1952, Herbert Hoover made it clear
where he placed the blame for the calamitous gyrations of the
world's economy in the 1920s and 1930s. In fact, blame was
assigned in the very first sentence: "The primary cause of the
Great Depression was the war of 1914-1918."
Hoover overstated World War I's impact as a cause of the Great
Depression and understated the role that the United States — and
its presidents — played in creating the mess. But he did have a point
in that the war certainly changed America's role on the world stage.
/ 08 Part ": Getting Depressed
For one thing, the war shifted the center of the world's economic
system from Great Britain to the United States, which had become
— ^ ^ "the world's banker." The United States had loaned billions to the
| }ff \ 1T\ /TkYfiftEWclQluring the war. After the war, it loaned billions more
I >/ k-/ I— ' tm^Jsm^3ide, as well as continuing to funnel money to its
wartime allies.
The United States was also the world's manufacturing leader.
Improvements in technology and manufacturing techniques in
the United States after the war resulted in American workers
producing goods at twice the rate of their European counterparts.
That made U.S. goods cheaper, which made them more sought
after by the rest of the world, which hurt European manufacturing.
So when the U.S. economy sagged badly at the end of 1929, the rest
of the world felt its pain. Or as the noted British economist John
Maynard Keynes put it at the time: "When America sneezes, the
world catches cold."
Paqinq reparations — or not
In addition to being a nightmarish waste of human life, World War I
carried a hefty price tag: an estimated total of $186 billion. (That's
about $2.7 trillion in 2008 dollars.) The United States, which didn't
even get into the fighting until 1917, spent $22.6 billion, much of it
in the form of loans to allied countries. Great Britain incurred $35.3
billion of the war's expense. Germany spent $37.7 billion — and
wasn't done paying, even after the war ended.
^tABE/? Article 231 of the war-settling Treaty of Versailles declared flatly
^/'j^N that Germany was responsible for "all the loss and damage" suffered
V iaJ / ky ^e countries that fought against it. Germany agreed — extremely
V^B^ grudgingly — to make a staggering $33 billion in reparations
(payment of damages) to its former foes. France was to get 52
percent, Great Britain 22 percent, Italy 10 percent, Belgium 8
percent, and smaller countries the rest.
That was a hefty hunk of change to demand from a country whose
economy had been eviscerated. Germany had lost 90 percent of
its merchant fleet and 75 percent of its iron ore production. The
democratically elected government put in place by Germans after
the war responded to the pressure by printing money like it was,
well, paper. The result was not just inflation, but super mega
hyperinflation. In 1923 it took 1 trillion German marks to buy what
one mark could buy in 1914. People literally used wheelbarrows to
carry their money.
_ Chapter 7: Misery Loves Company: How the Rest of the World Fared
— N p-^ U.S. pre*id<
DropBom
The United States, meanwhile, had a difference of opinion with its
recent allies about the whole reparations idea. Three consecutive
U.S. presidents — Woodrow Wilson, Calvin Coolidge, and Warren
11 offered to cancel part of the $12 billion owed the
y European nations if the Europeans would give
Germany a break on reparations payments. The European countries
refused, suggesting that the United States should write off their
debts anyway since U.S. military and civilian losses had been so
much smaller than the Allies' losses.
In 1923, Germany defaulted on its reparations payments. In
retaliation, France and Belgium invaded the Ruhr River region,
which was the heart of Germany's coal and steel industries.
German workers refused to labor under the foreigners, crippling
the industries and exacerbating Germany's already feeble finances.
Trying temporary fixes: The
baWes and \lounq plans
To head off more trouble, Great Britain and the United States
suggested an international committee be formed to find a
compromise. The ten-member panel (two each from Belgium,
France, Britain, Italy, and the United States) was headed by U.S.
financier Charles G. Dawes. In August 1924, the Dawes committee
offered a plan under which France and Belgium would vacate the
Ruhr region, Germany would follow a repayment plan that called
for smaller payments in the first few years, and international
bankers would manage some of Germany's economy.
Dawes, who became U.S. vice president under Coolidge in 1925,
was a co-recipient of the 1925 Nobel Peace Prize for his efforts.
And the plan did help Germany get its inflation under control and
its economy a little more stabilized.
But by 1929, German unemployment rates were soaring and the
country was again having trouble making its reparations payments.
Another international committee was formed, this one chaired by
U.S. businessman Owen Young, who had served on the Dawes
committee. The Young panel reduced German payments and
removed foreign oversight of Germany's economy.
The real fly in the economic ointment applied by the two committees'
plans was that they relied on a circular path of finances: The United
States made large public and private loans to Germany, which
then used the money to pay reparations to other countries, which
then used the money to repay their debts to the United States —
while borrowing another $7.8 billion from U.S. lenders between 1924
and 1929. As goofy as it was, the system worked for a while.
/ / 0 Part ll: Getting Depressed
DropBa®,
But as the 1920s ran toward their end, U.S. banks and investors
became more interested in pouring money into the U.S. stock
market |han into Germany, and U.S. loans eventually stopped.
s stopped, Germany stopped making reparations,
countries stopped making debt payments to the
United States. And when the U.S. stock market crashed in late
1929, U.S. banks withdrew whatever they could get back from their
investments in Europe, making matters worse for the affected
countries.
In June 1931, President Hoover proposed a one-year moratorium
on all the various debt repayments, which was somewhat grumpily
agreed to by the European countries. But Hoover refused to cancel
Europe's debts to the United States altogether. To do so would
have been highly unpopular with U.S. taxpayers, who saw themselves
paying higher taxes if the countries the United States had bailed
out in World War I didn't pay their debts.
"You have no idea what the sentiment of the country at large is on
the inter-governmental debts," Hoover wrote financier Thomas
Lamont in explaining his refusal to forgive the debts.
Germany and Austria, meanwhile, had agreed in spring 1931 to
form a "customs union" to foster free trade between the two
countries. This situation alarmed France, which withdrew its large
deposits from Austria's main bank. That withdrawal put banks in
Austria, Germany, and other countries on the edge of collapse. In
the ensuing economic downturn, German efforts to repay its war
reparations stopped. All told, it had repaid only about one-eighth
of what it had agreed to pay.
Making thinqs Worse With tariffs
Americans had always had a love-hate relationship with tariffs
(fees imposed by a country on goods, food, or raw materials
imported from other countries). That is, Americans who grew,
manufactured, or mined things generally liked tariffs because the
fees helped block foreign competition. American consumers, on
the other hand, generally disliked tariffs because they tended to
drive up prices. Farmers often opposed tariffs, too, because they
drove up the prices of manufactured goods.
To help get the country out of a post-World War I slump, Congress
in 1922 approved a set of tariff rates that were the highest in the
nation's history. The tariffs effectively prevented other countries
from selling much of anything to Americans, which hurt their
economies. And that situation made it harder for them to pay war
debts and other U.S. loans. In 1927, a world economic conference
_ Chapter 7: Misery Loves Company: How the Rest of the World Fared / / /
concluded that protective tariffs were bad things. An informal mor-
atorium on tariffs was agreed upon, with hopes that tariffs in place
would eventually be lowered.
t>HflD2*>*s^epublican-dominated Congress decided to make
good on a 1928 campaign promise to "protect" U.S. industries and
farmers. After a fierce fight that took 17 months, Congress narrowly
approved a bill authored by Representative Willis Hawley of
Oregon and Senator Reed Smoot of Utah. The Hawley-Smoot Act
dramatically raised tariffs on more than 650 goods, products, and
raw materials, from anvils (from 1.5 cents to 3 cents a pound) to
wool rags (7.5 cents to 18 cents a pound).
The bill raised howls from critics who saw it for what it was: The
beginning of a trade war. More than 1,000 economists signed a
petition asking President Hoover to veto the bill. But despite his
reservations that the bill went much too far, Hoover signed it into
law. Almost before the ink was dry from the six ceremonial pens
he used, other countries retaliated with steep tariffs of their own
against U.S. products. Eventually, 33 nations put up trade barriers.
That included Great Britain, which had for decades been a champion
of free trade.
The tariff wars drastically slowed down international trade, which
dropped from $36 billion in 1929 to $12 billion in 1932. As trade
slowed and international investments dried up, nations' economies
began creaking to a halt. By 1933, unemployment was 20 percent
or higher in most European countries. The world's industrial
productivity rate dropped by 40 percent from its level in the
mid-1920s. Even non-industrial countries in Latin America and
Africa were hurt because markets for their agricultural goods and
raw materials dried up.
Kicking the Gold Habit
In the late 19th and early 20th centuries, much of the Western
world adhered to a monetary system known as the gold standard.
Basically, it meant a nation tied its currency to gold. Nations could
then have a good idea what their currency was worth to other
nations. For example, an ounce of gold could be worth $20 U.S. or 5
British pounds. That meant a British pound was worth $4 U.S.
The idea was for the system to facilitate international trade because
everyone would know what everyone else's money was worth.
The system would also help prevent inflation (see Chapter 2 for an
explanation of inflation) because the money supply of each country
would be tied to the amount of gold it had. And the system would
help stabilize prices.
/ 2 Part ": Getting Depressed
^jftBEff An example: The United States develops a more efficient way to
f s\ make widgets and can thus sell them for less than British-made
IJwJ widgetsi British companies that need widgets would then buy U.S.
^M|< Z^rlifeYsL/hOold-backed British money would flow to the United
<J S&mm ThV^irould increase the U.S. money supply, and the
resulting currency inflation would raise U.S. widget prices.
Meanwhile, less gold in Britain would mean less currency, causing
British widget prices to drop. In theory, British and U.S. widget
prices would eventually even out.
But for the gold standard system to work, the countries involved
had to adhere to a few rules (which were completely voluntary).
They had to keep balanced budgets, where government spending
was no greater than revenues from taxes. They had to export more
than they imported, to keep their gold levels up. And they had
to raise interest rates when their gold holdings sagged. Doing so
would cause an overall drop in domestic spending, which would
bring the currency back in line with gold reserves.
The u/ar changes the rules
The gold standard was okay in normal times. But the advent of
World War I meant combatant countries had to spend a lot of
money in a hurry. They had to drop the gold standard and switch
to fiat currency, which is basically money that has no real value
other than as an agreed-upon medium of exchange. (We agree that
an apple is worth a piece of paper that says "one dollar." You give
me the apple; I give you the piece of paper.)
The advantage of fiat money is that you can put as much as you
want into circulation, as long as the printing press holds out and
everyone keeps agreeing the paper is worth goods and services.
The disadvantage is that it can lead to inflation, where prices go up
as the money supply goes up.
After the war, countries gradually began returning to the gold
standard. Between 1924 and 1929, more than 40 nations went back
to the system, including Britain in 1925, France in 1926, and Italy
in 1927. (The United States never really left the gold standard
system.)
.jABE/? But the gold standard was a very poor system to have when it
y\ came to fighting a major recession. Instead of the higher interest
JJM j rates and tighter money supplies dictated by the gold standard,
-55^ effectively fighting a recession calls for lower rates and expanded
money supplies. Those tools make it easier for businesses to
borrow and give consumers more to spend — and more confidence
to spend it.
_ Chapter 7: Misery Loves Company: How the Rest of the World Fared /
Some countries were quicker to pick up on this fact than others,
and the ones that figured it out first generally started climbing out
— ^ ^ of the Great Depression first. Great Britain and Sweden bailed out
| \ 1T\ ffytf^fyC ffindard in 1931 and soon began recovering. France
L-^ I \J yJ I— 9 N^M*o>S*4intil 1936 and was still staggering when World War II
began three years later.
In the United States, President Hoover adhered to the economic
medicine prescribed by classic gold standard theory — and nearly
poisoned his patient. The U.S. money supply was tightened, interest
rates were raised, and taxes increased. Things only got worse.
Goodbye, gold standard
When Franklin D. Roosevelt replaced Hoover in March 1933, the
new president made it clear from the outset that he was far more
concerned with curing the country's economic ills than abiding by
international monetary traditions.
"Our international trade relations, though vastly important, are in
point of time and necessity secondary to the establishment of a
sound national economy," Roosevelt said in his inaugural address.
On his second day in office, FDR halted all exports of gold. In April,
he issued an executive order banning private holdings of gold
except as jewelry, and he took the country off the gold standard.
A "bombshell message"
In June 1933, representatives of 66 countries convened in London
at an economic conference. They hoped to find a way to defeat the
Great Depression through international cooperation and to put
an end to tariff wars and currency manipulations that had led to a
"beggar they neighbor" attitude among nations.
Roosevelt sent his Secretary of State, Cordell Hull, as the head of
a U.S. delegation. American representatives huddled away from
the main conference with British and French financial experts. The
expectation among conference delegates was that the "Big Three"
would come up with a plan to stabilize the world's currencies.
But on July 3, FDR stunned everyone, including Hull, by proclaiming
via a telegraph (which came to be known as "the bombshell
message") that the United States would not be a party to any plan
to stabilize exchange rates or currencies, and also wouldn't be
going back to the gold standard. In fact, Roosevelt said, the United
States would be primarily concerned with cleaning up its own
economic mess.
/ / tj, Part II: Getting Depressed
"I do not relish . . . continuance of the basic economic errors that
underlie so much of the present worldwide depression," Roosevelt
said bluntly. "... A sound internal economic system of a nation is
Q[ri*a\ajrfa^^r in its well-being than the price of its currency in
a%gfr% pe>t«s of the currencies of other nations."
The message effectively ended the conference because without
the "world's banker" taking part, a multinational economic plan
wouldn't have much chance of succeeding. In April 1934, Roosevelt
drove a further wedge between the United States and its World
War I allies by signing a bill that prohibited U.S. banks from making
loans to countries that were tardy in their war debt payments to
the United States. Every country except Finland promptly quit
paying anything. It was clear that countries would have to fight the
Great Depression on their own.
Looking at the Great Depression
around the World
In 1933, perhaps for the first time since the early explorers came
and went, more people left the United States than immigrated to it.
Part of the reason was due to tighter immigration policies that had
been in place since the early 1920s. But part of it was due to the
tough times the United States was going through. (Heck, if that's
what people wanted to experience, they could stay home.)
The length and depth of the Great Depression varied from country
to country. Here's a quick look at how some other nations fared,
starting with the United States' neighbors to the north and south.
Canada
Many Canadians had traditionally gone south in tough times. But
that tactic didn't work when times were just as tough in the United
States. In 1924, more than 200,000 Canadians immigrated to the
United States. In 1933, only 6,000 did.
The Canadian economy relied heavily on foreign trade in the
1920s. More than one-third of its gross domestic product (GDP)
was derived from sales of its raw materials (such as lumber) and
crops (such as wheat). So when foreign markets dried up, so did
Canada's economy. Wheat prices dropped from $1.60 a bushel in
1929 to 38 cents in 1932. The country's GDP dropped 40 percent
from 1929 to 1933.
_ Chapter 7: Misery Loves Company: How the Rest of the World Fared /
^ ^ ot thousands ol
DropBoofe
Canadian industries had been "protected" by high tariffs. But there
was no domestic market for what they produced. As a result, hundreds
of thousands of workers were laid off, with unemployment rates
h as 27 percent in 1933.
Canada's agricultural midsection shared several things in common
with the U.S. Midwest in the Great Depression, all of them bad.
Like their Yankee counterparts, Canadian farmers suffered
through severe drought, scorching temperatures, smothering dust
storms, and plagues of grasshoppers (see Chapter 6). In fact, the
Canadians one-upped the Americans by also enduring hailstorms
that were severe enough to kill horses and destroy entire crops.
Canada's political leadership during the Great Depression both
mirrored and contrasted with the U.S. experience. When the hard
times began, Liberal Party leader William Lyon Mackenzie King
was prime minister. King lost the post to Conservative Party leader
Richard D. Bennett in 1930. As staunch a conservative as Herbert
Hoover, Bennett nonetheless pursued some remedies that were
surprisingly liberal, such as minimum wage laws and unemployment
insurance. But Canada's highest court struck down many of the
reforms as unconstitutional (just as the U.S. Supreme Court did to
some of Roosevelt's New Deal programs). Bennett was ousted in
1935, and Mackenzie King again assumed leadership.
Canada did have two things going for it that the United States
didn't. One was a fairly stable banking system. While thousands
of U.S. banks failed, dragging with them the savings of hundreds
of thousands of people, not a single Canadian bank failed during
the period. The other advantage was Canada's membership in
the British Commonwealth (a loose confederation of autonomous
nations with allegiance to the British crown). That association
helped shield Canada from defaulting on its foreign debts and
gave it open and tariff-free markets among other Commonwealth
countries for its exports.
Mexico
There's an old Mexican saying that the country should be pitied
because it is "so far from God, so near the United States."
But that wasn't completely the case in the Great Depression. True,
the United States was Mexico's best customer, and when the U.S.
economy tanked, Mexican exports were badly hurt, dropping 65
percent between 1929 and 1932. And true, Mexico had to absorb
some 300,000 Latinos who were pushed out of the United States as
unwanted labor during the 1930s (see Chapter 5).
110 Part ll: Getting Depressed
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But Mexico had a couple of things going for it that weren't hurt by
its proximity to Uncle Sam. First, its export-import ratio stayed in
the positive column (more going out than coming in) throughout
ession (although the ratio did shrink considerably),
plenty of silver on hand.
Mexico had been on a bimetallic standard of both silver and gold.
But as its money supply contracted and tax revenues shrank,
the Mexican government, under President Pascual Ortiz Rubio,
switched to a silver-only standard in July 1931. The country began
minting silver pesos and issuing millions of silver-backed notes.
Mexico benefited further when the prices of silver and oil, both
of which it exported, went up in 1934. In 1938, President Lazaro
Cardenas nationalized (that is, took government control of)
the oil industry. The railroads had already been nationalized.
Nationalization meant the Mexican government got the lion's
share of the revenues from the railroads and oil production, which
had heretofore gone to private, and mostly British or American,
companies.
The result of these changes was that Mexico's gross domestic
product actually grew during the Great Depression. The agricultural
side of the Mexican economy did not fare as well as the industrial
side. But all in all, Mexico's experience during the 1930s was less of
a Great Depression and more of a Not-That-Bad Depression.
Great Britain
The British were already in a bit of a financial hole when what the
Brits sometimes referred to as the "Great Slump" hit the world in
late 1929. The pre-Depression doldrums were a result of Britain
having gone back on the gold standard in 1925. The overvalued
British pound made the country's exports expensive and therefore
hard to sell.
The U.S. stock market crash and the subsequent drying up of U.S.
loans and investment hit Britain hard. British exports were cut in
half, and unemployment rose from 1 million in 1929 to 2.5 million in
1930 and 3 million in 1931 — about 24 percent of the workforce.
The pre-stock market crash government, led by the Labour
Party, gave way to a coalition government dominated by the
Conservative Party. The government cut wages of public sector
workers and reduced payments to a financially shaky unemployment
insurance system. The system was funded by employee contributions
and covered relatively few people. The government also raised
income taxes. The results were an increase in unemployment and a
decrease in economic activity.
_ Chapter 7: Misery Loves Company: How the Rest of the World Fared / /
^ ^ government als
DropBaeife
In 1931, Great Britain went off the gold standard and instituted
a government-funded unemployment insurance system. The
government also held down public sector spending, kept private-
own, and in short did everything it could to keep
'anufactured goods for export down. That was
important because Britain imported more than half its food and
needed a healthy balance between what it sold and bought from
abroad.
The cumulative effect of the British efforts was that its economy
did not fall as far or crash as hard as the U.S. economy. By 1935,
British unemployment was at a more reasonable 10 percent. In the
last half of the decade, the country's economy was further boosted
by heavy government spending on rebuilding Britain's military in
anticipation of a showdown with Nazi Germany. That turned out to
be a wise investment.
France
The French got to the world's Depression party a little late and
stayed until it was almost over. Unlike other countries, France had
been more wary about speculative investments in extravagant
building projects — or the U.S. stock market. As a result, its
monetary system was in better shape than those of other nations,
and it held large gold reserves.
French unemployment rates were also low in the first years of the
Great Depression, in part because it had lost so many work-aged
men during World War I. But the global slump finally caught up
with France in 1932. Tourism and the foreign sales of French
products such as perfume slowed. Unemployment rates reached
15 percent in 1932. While not as steep as in other nations, the rate
stayed at that level for several years. A series of strikes led to an
agreement between labor and management to increase salaries
and thus stimulate the economy. That step had only moderate
success, and the French economy continued to sputter until World
War II shifted its attention to other matters.
Latin America
Latin American countries were generally vulnerable to the fallout
from the Great Depression and pretty powerless to do much about
it. Many of the nations in Central and South America were heavily
dependent on the export of crops (such as coffee) or raw materials
(such as oil or iron ore). When international demand waned, the
Latin American nations could do little with their own products
because many of them lacked much in the way of manufacturing
plants.
118 Part ": Getting Depressed
— ^ |— ^ Mates, and in t
DropB©oks
The other big problem many Latin American countries had was
that their biggest trading partner and investor was the United
States, and in the early 1930s, Uncle Sam wasn't buying much and
ything to lend.
But a couple of things worked in the region's favor. It didn't have
much absolute need for imported goods, and its unemployment
problems were addressed by the fact that many out-of-work
people in the cities simply returned to subsistence farming in the
rural areas and were not dependent on government welfare or
unemployment insurance programs.
Some countries were hit harder than others. In Brazil, which was
run by a dictator named Getulio Vargas, the country's textile
industry ramped up as its coffee industry sagged. Vargas was
also chummy with fellow dictators in Germany and Italy, and he
established coffee-for-machinery barter arrangements. In Chile,
on the other hand, the country's main exports were iron ore
and copper, the demand for which fell sharply. Chilean exports
dropped 76 percent from 1929 to 1933 while its imports dropped
more than 80 percent.
If there was a cheery note in the Great Depression for Latin
American countries, it was that after World War II, the region
found itself far less dependent on the United States for trade and
investment, having gotten along without it during the 1930s.
Africa
Most of the African continent was still under colonial domination
by European powers at the onset of the Great Depression. Private
companies that held virtual monopolies often dominated the
economies of African colonies.
Because of this situation, the companies — rather than the
Africans themselves — bore the direct brunt of the Depression.
In many cases, the companies responded to lower prices for their
products by flooding the market, which served to drive prices
down even more.
But while the companies and colonial governments felt the initial
sting of the economic downturn, Africans weren't entirely spared.
In some cases, colonial governments replaced lost sales revenues
with various taxes on workers. In the Belgian Congo, failure to pay
the taxes resulted in forced labor, which amounted to slavery. In
other white-dominated colonies such as Rhodesia, Africans were
forced to abide by labor "contracts" that had the same effect as
serfdom.
Chapter 7: Misery Loves Company: How the Rest of the World Fared /
Linking Depression and Despotism
J \ 1T\ imyj^,lj|re^itish economist John Maynard Keynes morosely
I—/ I V/ KJ I—/ Vi^ltinlaYfEl victorious nations of World War I had been so
spiteful and selfish that the losers were sure to someday rise up
and shake off the second-class status to which they had been
relegated.
"Men will not always die quietly," Keynes wrote. "For starvation,
which brings to some lethargy and a helpless despair, drives other
temperaments to the nervous instability of hysteria, and to a mad
despair. And these in their distress may overturn the remnants of
organization, and submerge civilization itself."
The Great Depression was tailor-made for triggering the madness
of which Keynes wrote. People weren't quite sure how the world
got into this mess and were even less sure how to get out of it. But
that fact didn't deter some individuals who were remarkable for
their abilities of persuasion, their charisma, and their monstrous
thirst for power at any cost.
In Japan, a collection of military officers seized control. In Italy, the
power went to a former schoolteacher: Benito Mussolini. Germany
was dominated by a failed painter from Austria: Adolph Hitler.
And Russia was ruled by a seminary student-turned bank robber-
turned revolutionary: Joseph Stalin. Following is a brief look at
how these countries fared economically.
Military Japan
Japan was still relatively new to industrialization in the 1920s,
and its leaders strove to adapt Western technology and industrial
methods. But the country was heavily dependent on trade for
importing fuel and raw materials, and it didn't have a wide variety
of goods to export. In the late 1920s, its silk exports faced competition
from artificial fabrics made in the West, and the value of Japanese
exports dropped by 50 percent between 1929 and 1932. Bad rice
harvests compounded Japan's economic troubles.
These economic troubles sparked sharp anti-Western feelings and
led to fervent nationalism. They also helped the army gradually gain
control of the government. With government assent, Japanese textile
manufacturers began exploiting the workforce, paying starvation
wages and requiring workers to live in barracks at the mills.
Part II: Getting Depressed
The army also successfully pressed for increased industrialization
so more military equipment, weapons, and other supplies could
ced. By 1937, Japan had conquered much of China, and
rts helped pull the country through the Great
Mussolini's Italy
Benito Mussolini had come to power in Italy well before the onset
of the Great Depression. After becoming prime minister in 1922,
Mussolini quickly developed an almost completely undeserved
reputation as a master planner who ran an efficient and economical
government. In reality, "II Duce" ("The Leader") was erratic and
contradictory. But he was also lucky. Italy's unions and business
leaders were relatively docile and rarely blinked at his economic
efforts.
Those efforts included starting a "Battle for Land," which consisted
of draining swampland to create farms, and coercing Italians to
trade their gold coins and jewelry in return for a steel wristband
that said "Gold for the Fatherland" on it. He also forced citizens to
turn over foreign stocks and bonds to the national bank, and he
nationalized about 75 percent of Italy's businesses.
When all was said and done, Mussolini didn't really screw up the
Italian economy too much. The Great Depression didn't hit it all
that hard. Of course the Italian economy wasn't all that big a
deal to begin with. In fact, with only 2.8 percent of the world's
manufacturing, Italy was the least economically important of
Europe's big countries.
Hitter's Germany
In November 1923, a doughy little guy with a silly mustache
jumped on a table in a Munich beer hall and proclaimed "the
Nationalist Revolution." Adolf Hitler was promptly arrested and
served a year in prison, long enough to put together his plans for
when he got out. Using what a 1933 Time magazine article called
the "Sheer gift of gab, lung power and personal magnetism," Hitler
rose to prominence at the head of the National Socialist, or Nazi,
Party. By early 1933, the Nazis controlled the German Parliament,
and Hitler had been named chancellor. Later, he became known
simply as DerFiihrer (The Leader).
_ Chapter 7: Misery Loves Company: How the Rest of the World Fared 121
When Hitler came to power, the German economy was in shambles.
Unemployment was nearing 30 percent. But the Nazis quickly
— ^ ^ developed a mass jobs-creation program fueled by huge
| \ 1T\ !§?M?r^iMh©investments in public works projects that ranged
I y-J k/ I— " Vp«nMfiJ\*i^ to affordable automobiles called "the People's
Cars," or "Volkswagens." Inflation was managed by rationing
consumer goods, discouraging discretionary spending, and
implementing wage and price controls.
As the decade moved along, Germany also began re-arming itself,
spending huge amounts to create an industrial infrastructure that
could churn out war machinery. By 1939, German unemployment
was nearly invisible, and the country's gross domestic product
was 50 percent higher than it had been in 1929. Hitler had led the
creation of a war machine, a part of which can be seen in Figure 7-1.
Germany was ready for a world war.
Figure 7-1: Adolf Hitler on his way to a Nazi Party rally in
Nuremberg, circa 1935.
/ 22 Part ": Getting Depressed
Statin's Soviet Union
DropB
J;|ta-s^ that no world leader in the 1930s committed more
IgaiflSt humanity in the name of economic progress than
Stalin. It's probably also safe to say that no leader pulled
the wool over the eyes of the world better than Stalin.
Stalin, who came to power in the mid-1920s, was pushing to turn
the Soviet Union away from an agriculture-based economy to an
industrial economy well before the onset of the Great Depression.
He also wanted to make the country as economically self-sufficient
as possible. And he was largely successful in both efforts. In 1926,
about 80 percent of the Soviet populace lived on farms. By 1939,
about 50 percent did. Because the country didn't rely on international
trade, it weathered the Great Depression without severe upheaval.
At least that's what it looked like to the outside world. Americans
were effusive in their praise of what seemed to be an efficient
economic system. The esteemed newspaper editor William Allen
White called the Soviet Union "the most interesting place on the
planet." Humorist Will Rogers observed that "those rascals in
Russia . . . have got mighty good ideas. Just think of everybody in a
country going to work."
jjjjABE^ In fact, a lot of jobless Americans thought it was a great idea. In
1931, a New York City-based Soviet trade agency named Amtorg
v f» ) announced that it had 6,000 jobs for skilled workers in the USSR.
More than 100,000 Americans applied, and about 10,000 eventually
went.
What they found when they got there was a nightmare. Stalin's
method of getting people to move off farms to factories, or to
build canals and roads, was to totally disregard their right to live.
It's estimated that as many as 14 million people died in Stalin's
"collectivization" of farms, which meant turning them from modest
enterprises into massive agricultural factories. The food supplies
for entire villages were seized and transferred elsewhere, leaving
the villagers to starve. By 1934, another 500,000 Soviet citizens
were in gulags, or prison camps, where they were used as slave
laborers.
Many of the Americans who immigrated to Stalin's Soviet Union
were not allowed to leave. A New Jersey mechanical engineer who
did come back to the United States told a magazine reporter that
"The people are in rags. There is depression everywhere . . . how
anything fine or good can come from such squalor and misery is
more than I can understand."
_ Chapter 7: Misery Loves Company: How the Rest of the World Fared
v0 In an economic crisis, international cooperation is better than
competition.
Rigid currency systems aren't a good idea in tough times.
Here is a look at two organizations that seek to foster international
economic cooperation, and a brief recounting of what happened to
the gold standard after the Great Depression.
In July 1944, representatives of 45 nations met in the town of
Breton Woods, New Hampshire, to build a framework to help
countries get along, economically speaking, after World War II
ended. One idea to bear fruit was the creation of a World Bank.
With more than 180 countries as members, the World Bank keeps
tabs on global economic issues and provides advice — and
money — to developing countries. The bank is headquartered in
Washington, D.C., and is run by a board of 24 directors. The voting
power of each country is determined by its deposits in the bank. At
the start of the 21st century, the United States controlled about 17
percent of the votes, more than twice as many as runner-up Japan.
The World Bank is organized into five institutions:
f* International Bank for Reconstruction and Development
(IBRD): It provides loans, at market interest rates, to middle-
income developing countries.
International Development Association (IDA): It provides
interest-free loans to low-income developing countries.
^ International Finance Corporation (IFC): It provides loans
and loan guarantees to private sector business deals within
developing countries.
^ Multilateral Investment Guarantee Agency (MIGA): It
provides loan insurance against loss from noncommercial
risks such as political coups or civil wars within developing
countries.
International Centre for Settlement of Investment Disputes
(ICSID): It arbitrates arguments among investors and
developing countries.
Lessons Learned
ons learned from the Great Depression are these:
The World Bank
Part II: Getting Depressed
The World Bank has been criticized for requiring borrowing
nations to adopt government structural reforms that hurt education
and socjal service programs, and for rules that prohibited the
Heeling or restructuring debts. But it was also highly
'efforts in helping communist nations switch to a free
market system in the 1980s and 1990s.
and social serv
QOite:
The International Monetary Fund
and the end of the qoid standard
Like the World Bank, the International Monetary Fund (IMF) was
born at the 1944 Breton Woods conference. The idea was to
establish an organization that would monitor the world's monetary
system and try to head off the fiscal feuding that had marked the
Great Depression.
Countries that joined the IMF agreed to keep their currencies tied
to the U.S. dollar, which would be tied to gold, at $35 an ounce.
That meant, for example, that eight Mexican pesos would be
worth one U.S. dollar, and therefore eight Mexican pesos were
worth l/35th of an ounce of gold. Currency exchange rates could
be adjusted only when trade balances got severely out of whack,
and only with IMF approval. The idea was to create some stability
among the world's currencies and prevent countries from
devaluing their currency so their goods would be cheaper and thus
more attractive than competing countries' goods in global markets.
But by the end of the 1960s, the system was putting too great a
strain on the U.S. economy. The expenses of the Vietnam War
and the sweeping "Great Society" social service programs under
President Lyndon B. Johnson meant the United States needed to
put more money into circulation than the IMF system would
allow. So in August 1971, President Richard M. Nixon ended the
convertibility of U.S. dollars into gold.
The result was that nations' currencies were free to float against
each other. That change turned out to be a pretty good thing
because it gave countries more flexibility when it came to dealing
with economic crises such as the oil embargoes in the mid 1970s.
Since 1971, the IMF has focused on monitoring its 185 member
countries' economic situations, giving them advice and lending
money when necessary. The IMF differs from the World Bank in
that the bank focuses on long-term help for developing nations,
while the IMF concentrates on currency and financial sector
situations.
DropBooks Part 111
Living Through the
Great Depression
The 5th Wave By Rich Tennant
"Ho, seriously. I sold witj soul to the cowpatttj store.*
DropBooks
In this part . . .
12
#^eyond all the facts and figures and economic data of
^^the Great Depression are the people who lived
through it. How they did so is every bit as instructive as
all the numbers — and much more interesting.
This part starts with the story of Americans on the road,
some trying to escape a life in ruins, others looking for a
better life just over the next state line. Then it covers
some of the period's true characters, from machine gun-
toting desperadoes to homegrown Nazis and communists.
The part continues with a look at how Americans coped
with the doom and gloom by going to the movies or
pursuing other diversions. It ends with the story of
organized labor during the Great Depression, perhaps the
only part of the economy that did pretty well during the era.
Chapter 8
DropBook^ntheRoad
In This Chapter
Wandering around the nation
Hitting the road before turning 21
Moving from drought and dust to California
Surviving in the "promised land"
Lessons learned
MM yhen faced with the hard times and uncertainty of the Great
WW Depression, most Americans hunkered down at or near
home. The best course for them seemed to be to wait things out in
familiar surroundings. But hundreds of thousands of others decided
that maybe, just maybe, things would be better someplace else.
This chapter looks at who hit the road during the 1930s, with the
focus on two of the largest groups that did so. The first group
was the young: people under the age of 21 who saw no future for
themselves at home. The second group was the families who fled
the drought-stricken farms of southwestern states for the promise
of a new start in California.
The "Wanderinq Population"
As the Great Depression's impact deepened in 1932, it became
clear that local government and private organizations were not
going to be able to handle the huge numbers of people who needed
help. The ranks of the unemployed had swelled to the point of
bursting. Only about a quarter of those who needed aid were
getting it, and most of that relief was in the form of just enough
food to survive. Many people began to think that life elsewhere
couldn't possibly be as bad as it was at home. So they went to see.
By the end of 1932, an estimated 2 million Americans were on
the road. Up to 25 percent of them were believed to be under the
age of 21.
/ 28 Part "': Living Through the Great Depression
"The Depression," reported Fortune magazine in September 1932,
"along with its misery, (has) produced its social curiosities,
not the |east of which is the wandering population it spilled upon
ins of locomotion vary, but the objective is always
imewhere else. There were the hitchhikers whose
thumbs jerked onward along the American pike, and the number
of spavined Fords dragging destitute families from town to town in
search of a solvent relative or a generous friend."
Ridinq the mils
As Fortune noted, many people hitchhiked or piled what possessions
they could squeeze into the family car or truck and drove off. But
many took to the railroads that crisscrossed the country — not
inside passenger coaches as paying customers, but hidden away in
boxcars filled with human cargo.
In 1927, the Southern Pacific Railroad reported evicting 78,099
trespassers from trains or railroad yards. By 1932, the number was
683,457. In just one month during that year, the railroad reported,
it evicted 80,000 transients from boxcars in California alone. An
average of 700 "train hoppers" per day passed through Kansas
City, Missouri.
But hopping a freight train was a tricky and dangerous business:
In 1932, the Interstate Commerce Commission reported, 5,962
trespassers were killed on and around trains, 1,508 of them under
the age of 21.
Some of the transients had been riding the rails well before the
Great Depression started, as part of the "invisible poor" during
the seemingly opulent decade of the Roaring Twenties. But the
overwhelming numbers of people riding the rails or hitchhiking
around the country were those who had no other particular place
to be. They were dispossessed farmers and laid-off factory workers.
^vdOBaj The writer Thomas Wolfe described them as "the flotsam of the
>pZ^v\ general ruin of the time — honest, decent middle-aged men with
faces seamed by toil and want, and young men, many of them
teens, with their unkempt hair. These were wanderers from town
to town, the riders of freight trains, the thumbers of rides on
highways, the uprooted, unwanted male population of America."
Not all of the wanderers were men. The estimates of the number of
women on the road or riding the rails varied from about 15,000 to
more than 100,000. Women often dressed like men, both because it
was more practical for travel and also to keep a lower profile and
thus reduce the risk of assault. Other women wanderers viewed
Chapter 8: On the Road 129
— N J— ^ and you
DropBooka
the risks of assault as part of the life. "You have to put up on the
road with certain things," a young woman told a social worker in
1937, "and you got to give in when forced."
ot by as prostitutes, risking rape, pregnancy, and
disease for as little as a dime a customer. "So one day a guy says
to me 'get wise, sister, get wise,'" a teenage transient told Thomas
Minehan, a University of Minnesota sociologist who traveled the
rails doing interviews in 1932 and 1933. "So I got wise."
"Waiting for nothing"
Many of the nation's new transients were high school and college
graduates who had both careers and senses of self-worth that were
snuffed out by their new lives.
^OROf "It is the first couple of weeks at tramping that hurt a man the
^■vfC^xx most," a 25-year-old mechanical draftsman told The Forum magazine
~ in early 1932. "Added to the uneasiness of any animal in a strange
environment is the human feeling of depravity from his beggar's
status. One talks badly, goes hungry for unnecessarily long periods
of time . . . goes blocks out of his way to avoid policemen."
Thomas Kromer, an unemployed teacher, wrote an account of his
life on the road called Waiting For Nothing. In it, he describes a
typical meal at a homeless shelter: "They shove this stew before
us. It is awful. It smells bad. The room is full of the stench of this
rotten stew. What am I going to do? What can I do? I am a hungry
man. Food is food to a hungry man, whether it is rotten or not. I've
got to eat."
Once someone was on the road, it was hard to get off. Few employ-
ers were willing to give a job to a stranger who looked like a bum.
"Believe me sir," a transient told a federal investigator, "three days
in a box car, in zero weather, without water, sleep or food would
make anybody look like a thug. But give me three days of heat,
food, soap and water, a razor and a bed, and I will look just as
I am — a graduate of the University of Chicago."
Being mn off or arrested
Vagrancy became a national problem. Local relief agencies
couldn't cover the needs of their own residents, let alone tens
of thousands of transients. States were similarly overwhelmed.
So local and state authorities devised other methods of handling
unwelcome visitors. For example,
Part III: Living Through the Great Depression
Signs outside the city limits of Tucson, Arizona, read,
"Warning to Transients. Relief Funds for local residents only,
"s, do not apply."
, Georgia, transients were arrested and sentenced to
i jail, and then they were rented out as forced labor
to the state highway department or even private companies.
^ The Los Angeles Chamber of Commerce seriously suggested
establishing concentration camps for transients. The L.A.
police chief came up with an alternative: blockading the entire
state from "undesirable elements." See "The bums blockade"
sidebar for details.
In 1932, Congress considered making vagrancy a federal crime,
but the body's saner members prevailed, and the proposal was
dropped. In 1933, the Roosevelt administration established the
Federal Transient Program. By January 1934, 40 states had federally
funded transient aid programs operating. But in most cases, the
sheer numbers of applicants overwhelmed the program, and it
was closed in late 1935. The transient problem continued until the
United States entered World War II in late 1941.
|-«^ |— * i ransient
DropBooEs
3D rlavs ir
The bums blockade
With its hospitable year-round climate, California was a magnet for transients
duringthe Great Depression. The state held just 4.7 percent of the entire U.S. popu-
lation, but by June 1934 was hosting 14 percent of the country's transients. So in
February 1936, Los Angeles Police Chief James Edgar "Two Guns" Davis decided to
stem the flow of transients by sending 126 of his officers to entry points around the
state. There they stopped anyone who looked "undesirable." (The first man stopped
was a 62-year-old Chicago native who had been riding freights for four days in
freezing weather.) If they had no money and no job, they were offered a choice of
turning around or being arrested and serving six months in jail, where, Davis said,
they would find only "beans and abuse."
A federal court judge warned Davis the blockades were unconstitutional. The sheriff
of one county chased the LAPD out of his jurisdiction. The department became the
butt of national jokes. (A sign reading "Los Angeles City Limits" was put up just outside
Reno, Nevada.) But Davis refused to recall his men, and hundreds of transients were
refused entrance (much to the consternation of officials in the neighboring states of
Arizona, Nevada, and Oregon, who were left as hosts for the blocked transients).
In early April 1936, a Hollywood film director, who had been refused entrance to
the state by deputies because of his unkempt appearance, sued Davis. After it was
revealed that the chief's top aide had threatened to bomb the director's house if he
didn't drop the suit, Davis finally recalled his officers. The chief abruptly retired in 1938
after a corruption probe threatened his pension. And the transients kept coming.
Chapter 8: On the Road /3 /
The "Boxcar Children"
DropBmks
934, a 15-year-old boy stood before a judge in Salt
old his story. The boy's name was Robert Cozad.
Up until about a year before his appearance in court, Cozad had
worked on a farm near Muscatine, Iowa. When he lost the job, he
told the judge, he began "riding the brakes," or hopping freight
trains to look for work.
"I tried to get home last winter from San Diego, where a police
officer let me work in a gymnasium and sleep there," Cozad said.
"But out of St. Louis, I almost froze to death, so I beat it back to
California. I started three days ago to try again to get home. I was
in a boxcar out of Las Vegas with about 30 men, and a brakeman
found me shivering. Today I was arrested. I told them I was not
quite 16 and expected to be on the next freight out of Salt Lake."
Instead of catching a freight, Cozad (who eventually went home,
served in World War II, and died in 1990 at the age of 72) was put
on a work detail at a nearby federal flood control project.
There were a lot of kids like Robert Cozad during the Great
Depression. They were variously referred to in the newspapers as
"the boxcar children," "the wandering youth," or "the wild boys."
Some were on the road for the adventure. But most were there
for the same reasons their older counterparts on the road were
there: hard times. In his 1934 book 5qy and Girl Tramps of America,
sociologist Thomas Minehan said 83 percent of the 466 homeless
youths he interviewed gave "hard times at home" as their answer
for being on the road.
"He didn't exactly kick me out, but he gave me plenty of hints,"
a 1 7-year-old boy named Joe told Minehan about how his father
helped put him on the road. "He hasn't worked steady in the
last three years. There's seven of us at home, and I'm the
oldest ... I thought I'd stay until Christmas. I got the kids a duck
for Christmas, but I ain't saying how I got it. Then, before the old
man could start giving any more hints, I scrams."
In 1932, the National Children's Bureau estimated that as many as
250,000 youths under the age of 21 were on their own and homeless.
Others put the number as high as 1 million. Testifying before a
congressional committee in 1933, the chief special agent of the
Southern Pacific Railroad Company estimated that "75 percent
of the 1932 (rail) trespassers ranged in age from 16 to 25 years."
Sociologist Minehan reported that the youths he came in contact
with in his study were as young as 1 1 and had been on their own
for an average of 14 months.
Part III: Living Through the Great Depression
"The migratory youth is a product of these times which have
upset a whole world," a Detroit News reporter wrote, somewhat
melodramatically, in 1933. "His elders, his friends, his teachers, his
Jailed to understand a perplexed youth. They have
irfc*»wm his home into the physical and moral hazards of
transiency."
Locking up the schools
One of the reasons so many kids were on the road and in the
streets was because a traditional anchor of childhood — the
classroom — was locked up.
^BEfl Money to pay teachers and heat classrooms simply dried up.
i¥\ Many, if not most, public schools in the United States ended their
UM J 1933-34 school year in January 1934. Five thousand of them
^55^ were closed for the entire year. There were 25,000 fewer
U.S. schoolteachers in 1934 than in 1930. Forty percent of the
10 million high school-age kids in 1935 were not in school.
Not everyone thought this situation was a tragedy. Automaker
Henry Ford opined that "it's the best education in the world for
these boys, this traveling around. They get more experience in a
few weeks than they would in years at school."
If Ford was right, it was fortuitous that they were getting some
experience at something: A 1934 survey of 200,000 Pennsylvania
youths looking for jobs found that 71 percent had never been
employed. Without experience, they weren't likely to be employed
during times as bad as the Great Depression.
GiVinq boys a purpose: The CCC
One federal program that was almost certainly the nearest and
dearest to President Franklin D. Roosevelt's heart was the Civilian
Conservation Corps (CCC). The program, which put needy young
males to work restoring and improving federal lands, married
two of Roosevelt's keen interests: conservation, and giving young
people a purpose in life.
"It is my belief that what is being accomplished will conserve our
natural resources, create future national wealth and prove of moral
and spiritual value not only to those of you who are taking part,
but to the rest of the country as well," the president said in a July
1933 message in the CCC's official newspaper. "It's my honest
conviction that what you are doing in the way of constructive
service will bring to you, personally and individually, returns the
value of which it is difficult to estimate."
Chapter 8: On the Road /33
Ato "f^ So eager was Roosevelt to get the program started that the first
boy was enrolled 35 days after FDR took office in March 1933. By
July, 1,3J30 camps housed 274,000 boys on federal lands throughout
To qualify, applicants had to be between the ages of 18 and 25.
(Later, the range was expanded to 1 7 to 28.) They had to be male,
single, jobless, and at least 60 inches tall. They had to weigh at
least 107 pounds, have "at least three working teeth," and be in
good physical condition. Enlistments were for six-month terms
that could be extended to as long as two years (or longer if the
young man was promoted). The "soil soldiers," as they were called,
got $30 a month, at least $22 of which had to be sent home.
The CCC was a multi-jurisdictional affair. The camps were built and
maintained by the U.S. Army, while the work details were run by
the U.S. Forest Service and supervised by "local experienced men,"
known as LEMs. The LEMs were paid $45 a month.
Liberals didn't like the army's involvement, fearing the program
would amount to forced military training. They also didn't like the
low pay. Conservatives thought it a bad idea to give thousands of
members of the lower classes military training, for fear they might
use it someday against the government.
The program did have its troubles. One camp commander in
Oklahoma was killed by one of his charges. Another was arrested
for providing members with prostitutes and liquor. Despite rules
that specifically prohibited it, most camps were strictly segregated,
and in the end, only 7 percent of the CCC members were African
American. Moreover, as a relief project it was fairly insignificant
because it helped relatively few individuals and families. But it did
have some triumphs too.
LeaVinq their mark on the (and
The work done by the CCC was varied in scope and impressive in
quantity. Members built 47,000 bridges and 318,000 check dams
to fight erosion. They fought fires and floods, marked thousands
of miles of trails, constructed amphitheaters and boathouses,
and planted more than 1 billion trees. They planted hatchery fish,
drained bogs, and restored farmland. Many CCC projects can still
be seen in state and national parks around the country.
At its peak in September 1935, the CCC had 502,000 members in
2,514 camps. By the time it closed in 1942 (because of World War II),
2.9 million boys and young men had been through the program.
Part III: Living Through the Great Depression
The only V
"We built something, and I knew I had helped," one CCC member
recalled. "It was something you could take pride in, and there
wasn't a lot of pride available in those days."
wasn t a lot 01 {
OOKS
The Real- Life Grapes of Wrath
In March 1939, Viking Press published a novel by California author
John Steinbeck called The Grapes of Wrath. The book told the
story of the Joads, a 1930s Oklahoma family run off their land by
foreclosure. Loading up family members from three generations,
the Joads headed west in a sedan turned into a truck, to what
they hoped would be a new start in California. Along the way,
they encountered all sorts of hardship, including having both
grandparents die. When they got to California, they were met
mostly with hostility, prejudice, and exploitation. The story
doesn't end on an upbeat note.
The novel electrified the country. By the end of its first year in
publication, it had sold 430,000 copies. The book, wrote First Lady
Eleanor Roosevelt in her syndicated newspaper column, "made
you dread sometimes to begin the next chapter, and yet you
cannot lay the book down or even skip a page."
4
Not everyone loved the novel, which won a Pulitzer Prize and
helped Steinbeck eventually win a Nobel Prize for literature.
California farm owners screamed that it was an unfair vilification
of them. Oklahoma officials weren't happy that it made their state
look like hell on earth. Time magazine called it "a so-so book"
infected with "exaggerations, propaganda and phony pathos."
"So-so" or not, by the end of 1940 the story of the fictional Joads
had been made into a hit movie and helped trigger a congressional
investigation into the plight of real-life migrant farm families.
There were certainly plenty of real-life migrant families, mostly
from what was then referred to as "the Southwest" or "Cotton
Belt": Oklahoma, Texas, Missouri, and Arkansas. Most of the
migrant families from those states ended up in adjacent states. But
hundreds of thousands followed the route of the Joads, moving
west. Many headed to Oregon and Washington, seeking jobs on
mammoth federal dam-building projects. Far more went to
California. In one 14-month span between June 1935 and
September 1936, 86,000 people from the southwestern states
entered California, part of 350,000 migrants who came from all
over the country to the state between 1935 and 1940.
Chapter 8: On the Road /3.5
Jetting the rest of the story
DropB§»
even farmers c
ga didn't tell the whole story of the exodus, however,
more than half of the Cotton Belt migrants weren't
or farm laborers. About 40 percent were blue-collar
workers, and another 16 percent were managers, proprietors, or
other white-collar workers. Many of them had relatives who had
been living in California for years and offered them a place to live
and sometimes even jobs when they got there. They settled in
metropolitan regions, particularly around Los Angeles. Between
1935 and 1940, census figures showed about 100,000 people from
the Cotton Belt settled in and around Los Angeles.
Even those who were farmers seemed to have good reasons to go
to California. One reason was better wages. In 1935, the average
daily wage of a California farm worker was $2.95, with some form
of housing included. In Oklahoma, it was $1.35, with no housing.
"People think they are just a'flyin' if they can get $3 a day," one
arrival from Arkansas told a University of California researcher.
Trouble was, there were a lot more workers than work. A billboard
on U.S. Route 66 outside Tulsa, Oklahoma, told the tale: "NO JOBS
in California/ IF YOU are looking for work — KEEP OUT/ 6 Men for
Every Job/ No State Relief Available for Non-Residents."
But there was cotton in California. The crop, which had barely
existed in California before the 1920s, was booming in the 1930s.
Cotton acreage grew from 170,000 acres to more than 600,000
acres from 1927 to 1937. In the Cotton Belt, meanwhile, a federal
program designed to help farmers get back on their feet was
actually driving many of them off the land.
Contributing to the great
migration: The AAA
In 1933, the federal government instituted the Agricultural
Adjustment Act (which I cover in more detail in Chapter 6).
Basically, the act was designed to reduce overproduction, and
therefore raise farm prices, by paying subsidies to farmers in
return for less being planted. Landowners who rented part of their
property were supposed to share the subsidies with their renters,
but there was almost no government oversight to see that they
did. "I did everything the government told me to," boasted one
Oklahoma landowner, "except keep my renters."
Part III: Living Through the Great Depression
Instead, many landowners used the federal money to buy tractors
and/or hire day laborers while evicting their tenants. "I bought
tractorsj on the money the government give me and got shed of my
iowner said. "They got their choice — California or
friment relief program.
tractors on the i
iFeVleTkl^lQdc
wMJgVWnr
Coupled with the loss of as many as 20 percent of the Cotton Belt's
small farms to foreclosure notices, the unintended consequence
of the federal program was enough to push tens of thousands of
farmers and their families to choose California.
Heading u)e$t
Although the Joads' trip in The Grapes of Wrath took on aspects
of a forced death march, the trip from the southwestern states to
"the Golden State" wasn't that arduous for most people. The most
favored route was U.S. Route 66, which ran from Chicago through
Missouri, Oklahoma, Texas, and the deserts of New Mexico and
Arizona to the Pacific Ocean at Santa Monica. Some people took
buses or trains, or paid $10 for a ride with another family going
west.
Gasoline cost 10 cents a gallon; a car or truck in reasonably good
shape could make the trip in three or four days. (Of course, as
Figure 8-1 shows, not all vehicles were up to the task.) Most people
camped along the road. Studies showed that the average family of
four or five had $40 in cash and a net worth of about $200, including
the vehicle they were riding in.
Still, there were poignant stories to rival those of Steinbeck's
protagonists. One woman with six children was stopped at the
California border and told she had to buy a $3 auto license.
Tearfully, she told the police officer that she had only $3.40, adding
"that's food for my babies." He gave her the license, and she was
allowed into California.
Chapter 8: On the Road /37
Figure 8-1: An emigrant family nearTracy, California, in 1937.
Life in California
Despite its "promised land" image in many of the decade's movies,
California was not an economic oasis that escaped the cold hands
of the Great Depression. Unemployment in the state reached as
high as 29 percent in early 1933, and local government and private
relief agencies faced uphill battles in providing food and temporary
shelter for the needy.
But the state did recover quicker than most of the states in the
Midwest and East, and even in the middle of the decade, wages
were generally higher in California. Meat packers, for example,
were paid 68 cents an hour in California in 1935, compared to
46 cents in Oklahoma or Texas. Machine shop workers earned
67 cents, compared to 60 cents in Texas or Oklahoma.
Part III: Living Through the Great Depression
The prospect of better wages and the presence of friends and
family already living in the state were what drew many of the
Southwesterners to California. Many of them moved to new
ir5Jjn#mViLfi^^)n the outskirts of metropolitan areas. A typical
V*^wpapeV>*? offered small lots for "$20 down, and $10 a month,"
and promised neighborhoods with "Good schools, churches, fine
water" (and assurances to the almost exclusively white newcomers
that the new communities were "race restricted"). Assimilating in
the urban areas was a fairly smooth process for the newcomers.
But for those Southwesterners who gravitated to California's vast
Central Valley, it was a different story.
Fitting in Where they Weren't Wanted
The Central Valley of California is really two valleys that run right
into each other. To the north is the Sacramento Valley; to the
south the San Joaquin Valley. The San Joaquin Valley is cotton
country, and that's where most of the Southwesterners went when
they arrived in California.
Unlike most of the country at the time, California agriculture was
dominated by huge enterprises that were more crop factories than
family farms. In 1939, Fortune magazine reported that fewer than
10 percent of California farms produced half of the state's crops,
while the small farms that made up 41 percent of the total number
of farms produced less than 6 percent of the crops.
The large farms had always been dependent on seasonal workers
to get the crops in, and waves of migrants had filled the role: first
Chinese, then Japanese, then Mexicans and Filipinos. At the outset
of the Great Depression, 300,000 Mexicans and Mexican-Americans
had been forced or coerced into leaving the United States because
they were thought to be taking up jobs that could be filled by
whites. (See Chapter 5 for more on the Latino exodus.)
The Southwesterners seemed to be the perfect replacements. But
there was a big difference between the newcomers and the migrant
workers who had come before. In most cases, California's migrant
workers had been male adults and youths who moved from place
to place as different crops came to harvest.
With few exceptions, however, the Southwesterners tended to
stay put. That caused problems, as a 1937 report from San Joaquin
Valley health officials pointed out: "Growers have lost their fluid
Mexican workers, who miraculously appeared on harvest day and
silently slipped away after the work is done . . . the large families
of the Southwesterners harvest the cotton (but) when the cotton
is harvested, the family hangs on, swelling our emergency relief
rolls."
Chapter 8: On the Road
•— «^ — ^ comers
DropBo©
The region was not equipped to permanently house migrant
workers who didn't migrate after the crops were in. So the new-
comers ^et up squalid settlements of tents and patched-together
J£n©ide roads or stagnant drainage canals that simultane-
csrwdrinking water supplies and sewage systems.
Maladies such as hookworm, pellagra, and rickets were common
in the camps. In one season in just one county, 50 babies died of
dysentery and enteritis. "Even in mid-day, the interior of the shack
is dark," reported a social worker touring a migrant labor camp.
"The noxious odors are strong with dampness, rot, stale atmosphere.
Some shacks contain nothing but a bedroll."
As excited as they may have been about California's higher wages,
the migrants soon found out the higher pay couldn't compensate
for long stretches of unemployment. In 1938, the average migrant
family was living on $650 a year, less than half the national family
average of $1,500. The migrants found they had two choices: pack
up the family and move to another camp, following the crops, or
wait it out where they were. Most chose to wait it out, wanting to
put down roots.
Feeling the sting of discrimination
The appalling living conditions weren't the Cotton Belt migrants'
only problem. Many Valley residents regarded the newcomers as
second-class citizens. The migrants were referred to disparagingly
as Okies or Arkies and discriminated against just as other minorities
were discriminated against. Some movie theaters had signs that
directed "Okies and Negroes" to the balcony. Cafes posted placards
reading "No dogs or Okies."
A University of California anthropologist studying the social effects
of the large-scale farming system reported that longtime residents
thought of the newcomers as "ignorant and uneducated, dirty of
habit if not of mind, slothful, unambitious and dependent . . . not
rarely is he (the Southwesterner) accused of being dishonest." The
state's leading farm journal accused the newcomers of being "clay"
in the hands of communist agitators, of spreading disease, and of
fostering "unmorality (sic) in the schools."
The newcomers were also distrusted because of the roles they
played — both real and exaggerated — in the series of bitter and
sometimes violent farm strikes California suffered during the
decade (more on those in Chapter 11).
Part III: Living Through the Great Depression
While the claims of spreading disease and fostering "immorality"
were spurious, the Californians did have a legitimate beef about
one thirig: Taking care of the newcomers cost a lot of tax money.
ind 1940, taxes in five San Joaquin Valley counties
taxes in the rest of the state went up 50 percent.
Much of that extra tax revenue went to pay for aid to the
Southwesterners: Relief cases in the Valley went up 344 percent
between 1937 and 1939, while they increased in the state as a
whole by 77 percent.
In 1938, California business and agriculture leaders filed a petition
with Congress, signed by 100,000 residents. The petition asked the
federal government to lure the migrants back to their home states
by promising them relief payments there, and by threatening to
cut off relief if they stayed in California. "If they come to this state,"
declared one California legislator, "let them starve or stay away."
Putting dotin roots
But most of the Southwesterners stayed, despite state laws passed
in 1939 and 1940 that increased the minimum residency to qualify
for relief payments from one year to three years and then to five
years.
^vdOBaj "I would like to know who Californians think they are when they
/pZ^\ put themselves on a pedestal," one defiant Oklahoma woman
wrote to the Fresno Bee. "Oklahoma is a full-fledged state within
these United States, and as this is a free country, we have every
moral and legal right to be here."
Toward the end of the decade, 13 federal migrant camps with
showers, toilets, kitchen facilities, and communal halls were
established in California, along with six mobile camps that could
be moved as different crops reached harvest season.
Permanent settlements on the outskirts of Central Valley towns
gradually replaced the tent camps. Dubbed "Little Oklahomas," the
communities featured lots that could be had for $125 ($10 down
and $5 a month). It often took the owner several years to complete
construction of a permanent dwelling, but it got done. A 1940 Time
magazine story noted that in Salinas, California, "Little Oklahoma has
become East Salinas," with "new stucco or brightly painted five-room
frame houses crowding out vestiges of the old tar-paper shacks."
And as with so many aspects of the Great Depression, the great
migration of Southwesterners to California would be overshadowed
by the oncoming world war. The war brought tens of thousands of
new war production jobs to California and tens of thousands more
newcomers. By 1945, the "Okies" were Californians.
Chapter 8: On the Road / /
Lessons Learned
DropBoofe
ian Conservation Corps lasted only nine years, its
r longer, and it has become the ancestor of programs
that match young people and public service. Sadly, another lesson
of the Great Depression — the need to improve the shoddy
treatment of migrant farm workers — has yet to be fully learned.
Here's a look at two programs that could be said to be the children
of the CCC, and a brief look at the status of migrant workers in
21st-century America.
Working to seri/e
The concept of a volunteer organization to help developing nations
had been kicking around Congress throughout the 1950s. But it
became a reality after John F. Kennedy won the presidency and
established the Peace Corps in 1961.
The Peace Corps is an independent federal agency. Foreign
governments in developing countries ask for help in specific areas,
such as teaching English, or engineering, agricultural, or business
skills, and the Peace Corps sends volunteers. From 1961 through
2008, the Peace Corps sent about 200,000 volunteers to 139 countries.
The volunteers, who in early 2009 were 60 percent female, 94
percent unmarried, 94 percent college graduates, and an average of
27 years old, sign up for stints that are usually 27 months but can
last a maximum of five years. Volunteers are given allowances to
cover the cost of living in the country to which they are assigned,
a round-trip air ticket, medical and dental insurance, and a $6,075
"transition award" when they return.
The domestic version of the Peace Corps is AmeriCorps. President
Bill Clinton and Congress created this agency in 1993. There are
three subdivisions of AmeriCorps:
AmeriCorps State and National: This division provides grants
to public agencies and nonprofit and religious groups, which
use the money to recruit and train workers to help meet
community education, environmental, health, and public
safety needs.
AmeriCorps VISTA (Volunteers In Service To America):
VISTA was originally begun in 1965 and became part of
AmeriCorps in 1993. It functions like AmeriCorps State and
National, except that it focuses on problems in low-income
communities.
Part III: Living Through the Great Depression
^ ce
to<5
AmeriCorps NCCC (National Civilian Community Corps):
NCCC consists of teams of 10 to 12 members located at four
centers around the United States. They essentially function
^/i^Corps' emergency teams, responding to specific
ues>s'for help in the geographic region they cover.
AmeriCorps members receive living allowances during their
one-year assignment and end-of-stint education grants that in 2009
were $4,725.
Losing ground in the fields
As the United States got deeper into World War II and more men
were called to military service, a shortage of farm labor developed.
So in 1942, the U.S. and Mexican governments reached an agreement
that allowed Mexican workers — called braceros — to enter the
United States. Thousands of Mexicans, some of whom had been
pushed out of the United States during the Great Depression,
entered the country, most of them taking jobs in farm fields in the
West and Southeast. Many of the jobs in the West had been held by
the "Okies": migrants from the southwestern United States in the
1930s.
The bracero program ended in 1964, in part because advances in
mechanized farming had reduced the need for workers, and in part
because criticisms were leveled at both governments for the harsh
treatment and brutal living conditions endured by the workers.
But hundreds of thousands of migrant workers, in the country
both legally and illegally, continued to labor in the fields under
deplorable situations. Landowners sometimes tried to insulate
themselves from responsibility for the workers by hiring them
through a farm labor contractor, who acted as a middleman.
In 1983, Congress passed the Migrant and Seasonal Agricultural
Workers Protection Act (MSPA). The act requires labor contractors
to register with the U.S. Department of Labor and sets standards
for pay, working conditions, transportation, and housing.
But abuses have continued. In 2008, a congressional committee
heard testimony that pineros, migrant workers who labor in
reforestation and clearing timber, were often ripped off by their
employers or not equipped with safety gear. Another committee
was told about tomato field workers in Florida who were beaten
and kept in virtual slavery.
Chapter 8: On the Road
DropB®
A 2008 study by the U.S. Department of Agriculture reported there
were about 1 million migrant farm workers in the United States,
down frpm about 3 million in 1953. The study found that migrants
as likely as nonmigrants to have homes with no
mes as likely to live in overcrowded conditions. It
found that, adjusted for inflation, farm worker hourly wages had
risen 76 cents from 1975 to 2006, about 2 percent per year, to
$9.87.
"While critical to many agricultural sectors," the study concluded,
"hired farm workers remain among the most economically dis-
advantaged working groups in the United States. This relative
position within the U.S. occupational structure has changed little
over time."
/ (f, Part III: Living Through the Great Depression
DropBooks
Chapter 9
DropBoo)^— and
Desperadoes
In This Chapter
Criticizing the status quo — and FDR
Making political noise from the left (communists) and right (Nazis)
Fighting crime while admiring criminals
Lessons learned
any historians still marvel at how Americans kept their
political cool during the Great Depression. After all, there
was plenty to be confused and angry about. People in other
countries, faced with similar situations, either embraced new
dictators or continued to put up with old ones. But Americans
embraced neither revolution nor rule by despots.
Because they didn't embrace radical extremes, however, doesn't
mean Americans didn't think about them. This chapter takes a look
at some of the leading leader wannabes of the 1930s, as well as efforts
to influence the political process from both the left and right of the
ideological spectrum. It also examines how Americans who were
frustrated and wanted to strike out at "the man" did so vicariously
through the bloody exploits of the Great Depression outlaws.
The Soapbox Supermen
By the beginning of 1934, the Great Depression was more than four
years old, and people were getting more than a little tired of it. The
enthusiasm and optimism generated by the election of Franklin D.
Roosevelt in November 1932 had largely worn off.
Lorena Hickok, one of a group of investigators sent out by the
Roosevelt administration to take the pulse of the country, wrote
back to Washington, D.C., in April 1934 that the country's pulse
was a bit feeble.
Part III: Living Through the Great Depression
"I've been out on this trip now a little more than two weeks,"
Hickok wrote. "In all that time I've hardly met a single person who
seemediconfident and cheerful . . . nobody seems to think anymore
is going to work."
Hickok also noted that she was hearing more talk about the possible
need for not only a new government, but a new kind of government.
"If I were 20 years younger and weighed 75 pounds less," she joked,
"I think I'd start out to be the Joan of Arc of the Fascist movement
in the United States."
Despite Hickok's gloomy analysis, Americans made it clear in
the 1934 congressional elections that if they were growing rest-
less under Roosevelt, they didn't think it was time to give the
Republicans another chance. The GOP lost 14 seats in the House of
Representatives and 10 in the Senate. Yet Roosevelt's real political
problems were to come not from Republicans but from an elderly
doctor in California, a Roman Catholic priest in Michigan, and a
bombastic U.S. senator from Louisiana. Here's a look at the trio of
trouble.
Francis £ TouJnsend
Francis Townsend said his idea came to him after watching two
elderly women look for something to eat in garbage cans behind
his Long Beach, California, home. Townsend was a 66-year-old
physician/real estate salesman in the fall of 1933. His idea was to
provide financial security for older people.
The Townsend plan, which he called the Old Age Revolving
Pension Plan, was simple — and simplistic. Under it, everyone
over the age of 60 would be guaranteed a pension of $200 a month,
provided they spent the entire amount each month in order to
stimulate the economy. The funds would come from a tax on all
wholesale and retail sales. Economists pointed out that the plan
would take half of the nation's wealth to provide security for only 8
percent of the population.
A lot of people ignored the economists. By 1935, 5,000 "Townsend
Clubs" had sprung up around the country. By the beginning of
1936, a staggering 20 million Americans — one-fifth of the entire
adult population — had signed petitions urging congressional
passage of his plan.
Chapter 9: Demagogues and Desperadoes
Charles £ Couqhtin
DropB$«
Wallace Steane
lin was a man of the cloth, but he may have been
His voice had such an entrancing quality, author
gner wrote, "that anyone turning past it on the radio
dial almost automatically returned to hear it again."
Born in Canada in 1891, Coughlin was a Roman Catholic priest with
a small parish in the Detroit suburb of Royal Oak when he began
a radio program in 1926. A staunch anti-communist and ardent
nationalist, Coughlin's program became so popular that by 1930,
he was on 17 CBS-owned stations. It later became so controversial
that by 1932, CBS dropped him.
Undeterred, Coughlin started his own network. His "Golden Hour
of the Little Flower" show was soon broadcasting to an estimated
audience of 30 million people each week over 60 stations, and
raking in $20,000 a week in contributions. (In 2008, the audience of
Rush Limbaugh, the nation's most popular radio personality at
the time, was estimated at about 14 million.) Coughlin reported
getting 80,000 letters a week — more mail than FDR — and Fortune
magazine dubbed him "just about the biggest thing that ever
happened to radio."
Coughlin was initially an ardent booster of Roosevelt, saying the
country's choice was "Roosevelt or Ruin" and that FDR's package
of proposals, dubbed the New Deal, was also "Christ's Deal." But
the "radio priest" eventually differed sharply with the president
over several issues. A virulent anti-Semite, Coughlin began referring to
the New Deal as the "Jew Deal." By the end of 1934, he had formed
a quasi-political party called the National Union for Social Justice,
which claimed 7.5 million members.
Huey P. Long
Huey Long was a one-time traveling shortening salesman whom
Roosevelt regarded as "one of the two most dangerous men in
America" (the other being Army Chief of Staff Douglas MacArthur).
Long was born in a log cabin in 1893, the seventh of nine children.
By the age of 21, he had finished law school, and after paying his
dues in lower elective offices, he was elected governor of Louisiana
in 1928. He was called "Da Kingfish" by his friends (after a popular
radio character), and Long had a lot of friends. As governor, Long
built hundreds of miles of new roads, eased taxes on the poor,
imposed new taxes on oil companies and other businesses, and
supplied textbooks and buses to the state's schools.
Part III: Living Through the Great Depression
'The only
i^=^^ "I'm for the poor man," he told reporters, "all poor men. Black and
white, they all gotta have a chance. 'Every man a king,' that's my
motto. "■
ViotVmK» wS^lso a virtual dictator. Through coercion or bribery,
he controlled almost every judge in the state, most of the legislators,
and the police. Critics were beaten, kidnapped, jailed, or black-
mailed into silence. Long was so powerful that he had himself
elected a Democratic U.S. senator from Louisiana while also
holding on, for a time, to the governor's office.
Like Coughlin, Long started out a Roosevelt supporter and turned
into a leading Roosevelt basher. Like Townsend, Long had a
grandiose plan for curing the country's ills. Under his Share Our
Wealth Plan, Long proposed to limit the amount of money an
individual could have or could make in a single year. The money
confiscated from those who had more than the limits (which
varied from $1.5 million to $5 million in cumulative wealth and
from $600,000 to $1.8 million in annual income) would be
redistributed so that every American family would have $5,000
worth of annual salaries and amenities like a car and a homestead.
Like Townsend's plan, it was mathematically goofy. Economists
pointed out that taking all the money from the rich and giving it to
the poor would amount to about $400 per family, not $5,000. It was
a fact lost on lots of people. Long developed a national following
and became a force in Washington, D.C., as well as Louisiana.
Heading for a shotidouJn tilth FDR
In May 1935, Long, Townsend, and Coughlin began talking about
forming a third political party to run against Roosevelt in the 1936
presidential election campaign, with Long as the candidate. "I'll
tell you here and now," Long said in the summer of 1935, "FDR will
not be the next president of the United States. If the Democrats
nominate Roosevelt and the Republicans nominate (former
President Herbert) Hoover, Huey Long will be your next president."
Roosevelt was acutely aware of the threat from the troika of
demagogues. "I am fighting communism, Huey Longism, Coughlinism,
Townsendism," FDR told a reporter. "I want to save our system"
from "crackpot ideas." Roosevelt also knew that Long didn't
actually think he could win in 1936 but would run to pull enough
votes away from Roosevelt to keep the president from winning.
Chapter 9: Demagogues and Desperadoes
"Long plans to be a candidate of the Hitler type," FDR wrote in a
letter to the U.S. ambassador to Germany. "He hopes to defeat the
Democratic Party and put in a reactionary Republican. That would
OrffVt^^^try to such a state by 1940 that Long thinks he could
rfclll oiS*rftor."
But the best-laid plans of Long, Coughlin, and Townsend went awry
on the evening of September 8, 1935. Coming out of a legislative
session in the Louisiana Capitol, Long was shot by a man whose
family reputation had been smeared by the senator. Long died two
days later. (His bodyguards pumped 61 bullets into the assassin.)
Without a bonafide candidate, the hopes of Coughlin and
Townsend were dashed, although they tried anyway. A North
Dakota congressman named William "Liberty Bill" Lemke was
recruited, and he ran on the Union Party ticket. Coughlin vowed to
quit radio if Lemke didn't get at least 9 million votes in the election.
As strange as it sounds now, the Roosevelt camp had reason for
concern about the election, if not Lemke. Several polls predicted
that the Republican candidate, Kansas Governor Alf Landon, would
win easily. But the pollsters asked the wrong voters, neglecting to
include people at the bottom of the economic ladder or African
Americans, who traditionally had voted Republican but switched
in huge numbers to FDR's Democratic Party.
Roosevelt won a smashing victory, gathering 27.7 million votes to
Landon's 16.7 million and Lemke's 880,000. FDR carried every state
but Maine and Vermont. "I knew I should have gone to Maine and
Vermont," Roosevelt quipped after the returns were in.
Coughlin, who died in 1979, did not give up his radio show until
1942, but he never again attained the popularity or influence he
once had. Townsend, who was briefly jailed for refusing to testify
before a congressional committee, faded from the public eye and
died in 1960 at the age of 93. As their influence decreased, however,
there remained considerable noise during the 1930s from the left
and the right of the political spectrum.
Fascists, Nazis, and Reds
It's a truism of American politics that Americans don't mind radical
change — as long as it's done in moderation. The veracity of that
idea, however, was sorely tested in the Great Depression. The
desperate times had people thinking that maybe something
desperate needed to be done.
1 SO Part "': Living Through the Great Depression
iis^^^x "Never before or since have I heard so much open and bitter
cynicism about democracy and the American system," said
six-time«Socialist presidential candidate Norman Thomas.
'The only
ins thought the president should seize power.
"What we need now is martial law," magazine publisher Bernarr
Macfadden told readers of Liberty Magazine. "This is no time for
civil law. The president should have dictatorial powers . . . the
Constitution should not interfere with the remedies which are
essential to get us out of this appalling depression."
Hatching the "Business Plot"
If a former Marine Corps major general was to be believed, at least
one group of business leaders thought power should be seized
from the president. In November 1934, retired Major General
Smedley Butler told a congressional committee that a man named
Gerald MacGuire had approached him in mid-1933. MacGuire was
heir to the Singer Sewing machine fortune and one of Wall Street's
richest investors.
Butler said MacGuire wanted him to participate in a fascist coup of
the government. The plan, according to Butler, was to install Butler
in a cabinet-level post as "secretary of general affairs." Roosevelt
would remain as a puppet, but a group of business leaders would
actually run things. Butler said he was promised an army of
500,000 veterans and $30 million in financial backing.
MacGuire vehemently denied the whole thing, which came to be
known as the "Business Plot," and there was little corroborative
evidence. Nonetheless, the committee concluded that "there is
no question that these attempts were discussed, were planned,
and might have been placed in execution when and if the financial
backers deemed it expedient." But for reasons never made
entirely clear, nothing came of the allegations or the committee's
investigation.
Defending the uteakhy
Some of the folks suspected of being in back of the "Business Plot"
put together an organization in August 1934 that they called the
American Liberty League. The members included business giants
such as DuPont, General Foods, General Motors, and Standard
Oil, and politicians from both parties — including Al Smith, the
1928 Democratic presidential candidate-turned-Roosevelt hater.
The organization's purpose was to "defend and uphold the
Chapter 9: Demagogues and Desperadoes
l—V 1-^ League's purpc
DropB«fe
Constitution" and "foster the right to work, earn, save and acquire
property." Left unstated but obvious to everyone was that the
League'f purpose was to defeat Roosevelt's bid for a second term
portray the administration's depression-fighting
s^.s3t best socialist and at worst communist.
The wealthy had good reason to be nervous. In his annual message
to Congress in January 1936, FDR called for "unceasing warfare" to
be waged on "our resplendent economic autocracy." The Liberty
League hit back at a New York luncheon of 2,000 people later in the
month — a gathering The New York Times called "the greatest
collection of millionaires ever gathered under one roof."
"The New Deal smells of the stench of Communistic Russia," Smith
told the crowd. "There can be only one Capitol, Washington or
Moscow. There can be only one atmosphere of government, the
clean fresh air of free America, or the foul breath of Communist
Russia."
Actually, that sort of rhetoric and the League's opposition probably
ended up helping Roosevelt, because the enemy of the rich had to
be the friend of the poor — and there were a lot more poor people
than rich people during the Great Depression.
Trying to get a footing
as communists
While Roosevelt's enemies were trying unsuccessfully to paint
his administration with a communist brush, the real communists
were struggling mightily to establish themselves in Depression-era
America.
Under a Soviet strategy called "the Popular Front," American com-
munists tried to enhance their image as ordinary Americans who
just happened to believe the government model the United States
should follow was that of the Soviet Union. They joined churches
and formed book clubs, dining clubs, and theater groups. They
ingratiated themselves with Hollywood celebrities by sponsoring
anti-Nazi or pro-Spanish Republic groups. The communist newspaper
The Daily Worker even began running a large sports section.
But outside of a few intellectuals and a few labor unions, the
communists made no significant inroads during the 1930s. And
after Soviet leader Joseph Stalin signed an alliance with Germany's
Adolf Hitler in August 1939 Qust before Germany invaded Poland
and started World War II), the communists lost what little credibility
they may have had.
/ £2 Part l": Living Through the Great Depression
Shitting for Der Ftihrer
oiirel 3FQHp trying to make a mark in Depression-era America
OWEAF\C5 "§nt- After Hitler rose to power in Germany in 1933,
some Germans and German-Americans formed groups to support
the new German leader and his National Socialist, or Nazi, Party.
The first of these groups called itself the "Friends of New Germany"
and had the blessing of Hitler's government. The group, which
never grew larger than 5,000 to 10,000 members, mainly held rallies
to rhetorically rough up communists and Jews, and soon was more
of an embarrassment to Germany than an asset. In October 1935,
German Nazi officials ordered the organization to disband.
In less than a year, another group sprung up, calling itself the
"German-American Bund' (meaning "organization"). A fellow
named Fritz Kuhn, who had fought for Germany in World War I but
had become a naturalized U.S. citizen, headed the group. Kuhn's
group held rallies, set up recreational camps for youths and families,
and simultaneously extolled the joys of Hitler's Germany and the
"evil conspiracies" being concocted by Jews.
The Bund began attracting the attention of U.S. federal agents
when reports surfaced that Kuhn had a force of 200,000 men ready
to take up arms. In reality, the group never had more than perhaps
7,500 members, and Kuhn was a first-class chowderhead. Hitler's
government was so unimpressed that it ordered the group to stop
displaying Nazi symbols or emblems, and the German ambassador to
the United States referred to Kuhn as "stupid, noisy and absurd."
The Bund held its largest rally at New York's Madison Square
Garden in February 1939. The rally attracted a crowd of about
22,000. But after the rally, Kuhn was arrested for embezzling
money from his group. After the Japanese attack on the U.S. Naval
base at Pearl Harbor on December 7, 1941, the Bund was formally
dissolved and some of its other officers were arrested for
attempting to avoid the draft or engaging in subversive activities.
Sticking With the Constitution
In the end, none of the extremist efforts made much headway with
Americans, despite the anger, fear, and uncertainty generated by
the Great Depression.
Chapter 9: Demagogues and Desperadoes
DropB
That fact was underscored by two surveys conducted by pollster
Elmer Roper in late 1939 for Fortune magazine. The surveys found
that 67 percent believed it was government's responsibility to
ipTjp^T&el/tfr^ople in need, while less than 10 percent believed it
Vms>imt\teflange the entire U.S. Constitution.
Most importantly, almost two-thirds believed "the future holds
opportunity for advancement," and 76 percent believed their
children faced a better future than their own.
Robin Hoods and Dirty Rats
The 1930s saw the resurrection of an American archetype: the
outlaw. Instead of the 19th-century six-guns, horses, and "head 'em
off at the pass" motif, the Great Depression version was machine
guns, Fords, and "come and get me coppers!"
Although violent crime rates actually decreased during the decade
(compared with the previous decade), bank robberies, kidnappings,
daring jailbreaks, and desperate shootouts between cops and
killers became front-page news on an almost daily basis. Perhaps
people wanted to hit back at whoever had caused the Great
Depression, and they got a vicarious kick out of the brash behavior
of criminals.
Whatever the reason for the public's fascination with bad guys and
bad girls, it was certainly aided and abetted by the mass media.
Hollywood studios quickly figured out that gangster films were
the single most popular genre among moviegoers. The studios
churned out 50 such movies in 1931 alone.
In the early years of the Great Depression, criminals were often
depicted as tragic figures that went bad because of a tough break
somewhere along the line. They were also often portrayed as
committing crimes against even more insidious criminals, such as
corrupt politicians, bankers, or businessmen (which a lot of people
may have wanted to do themselves).
In a 1932 piece about actor James Cagney's role as a gangster in
Public Enemy, New York essayist Lincoln Kirstein wrote that "when
Cagney gets down off a truck, or deals at cards, or curses, or slaps
his girl ... he is, for the time, being the American hero, whom
ordinary men and boys recognize as themselves."
Part III: Living Through the Great Depression
^ Boy" Floyd, Gee
Newspapers sensationalized crooks by giving or playing up catchy
nicknames such as George "Baby Face" Nelson, Arthur "Pretty
Boy" Fl<jyd, George "Machine Gun" Kelly, and Alvin "Creepy"
stalled various criminals as the nation's "Public
even though there was no such official list.
And there was no such thing as too much crime news. For example,
the day after bad guy John Dillinger (whose wanted poster can
be seen in Figure 9-1) was gunned down outside a Chicago movie
theater (where he had been watching — what else? — a gangster
movie), the Fresno Bee carried five front-page stories on crime.
Three were related to Dillinger, one described a Texas prison
break by pals of Clyde Barrow (of Bonnie and Clyde), and another
told of the manhunt for Baby Face Nelson.
WANTED
JOHN HERBERT
DILLINGER
sidodobo
$5060.00
E
Figure 9-1: A 1934 FBI wanted poster for
John Dillinger, offering a reward of $10,000
for his capture.
The papers — and other media — also shamelessly played up the
Robin Hood angle. The papers reported how Bonnie and Clyde
sometimes burned mortgage notes when they robbed a bank.
The iconic 1930s troubadour Woody Guthrie wrote a song about
Pretty Boy Floyd that included the lyrics: "There's many a starving
farmer/The same old story told/ How the outlaw paid their mortgage/
and saved their little home."
Chapter 9: Demagogues and Desperadoes
A popular tale was how bad man Dillinger (see the sidebar on him
later in the chapter) once asked a farmer during a bank robbery if
— ^ — ^ the $50 in the farmer's hand was his or the bank's. When the fellow
J ]Tr\ 1T\ f^it^VG accol"ding to the story, Dillinger told him to keep it.
I V/ l—J Vil/eVwal wfc^ who became rich robbing poor people," an admirer
wrote to an Indianapolis newspaper. "I am for Johnnie."
Thirsting for justice
However much Americans liked reading about or watching
criminals on the silver screen, however, most people didn't really
like the idea of criminals going unpunished. Seemingly everyone
had a cure for a crime wave that, according to statistics, didn't
really exist. The cures ranged from public hangings to reinstating
whipping as a punishment to establishing a "Devil's Island" prison
for hard-core bad guys (which actually came about in 1933 when
San Francisco Bay's Alcatraz Island became a federal prison).
New York passed a law that made it a crime to be someone "who
bears an evil reputation" and "consorts with thieves and criminals
or frequents unlawful resorts." Most cases under the law were
thrown out as unconstitutionally vague. But that didn't stop the
New York commissioner of corrections, Walter N. Thayer, from
calling for a National Public Enemies Act that would allow the
jailing of any "individual with a known record who consorts with
known criminals and has no visible means of support."
"Any city can be cleared of known criminals in 48 hours," Thayer
asserted, "if the hands of the police are unshackled and if the
powers that be will assure them of backing and support."
But the powers that be wouldn't assure them of federal backing and
support, at least not while Herbert Hoover was president. Hoover
balked at more federal involvement in fighting crime because it
would cost money and intrude on state's rights. In a 1930 speech,
Hoover said, "Every state has ample laws . . . what is needed is the
enforcement of those laws, and not new laws. Any suggestion of
increasing federal criminal laws in general is a (bad) reflection on
the sovereignty and the standing of state government."
Left unsaid by Hoover, at least publicly, was that he had little faith
in the federal Division of Investigation (which formally became the
Federal Bureau of Investigation in 1935). Federal investigators were
not allowed to carry firearms, could not make arrests, and had
such a reputation for corruption that they were sneeringly referred
to as "the Department of Easy Virtue."
Part III: Living Through the Great Depression
<£t° After Roosevelt replaced Hoover in the White House in 1933,
yf^T7\ however, the federal government took a new approach. In April
.-"^jj-Sjg 1934, Attorney General Homer Cummings announced a 12-bill
l^Pi (^W^Hf "©Package that included making federal crimes of
^ TMnVrocfJeS^ interstate flight to avoid prosecutions, and
transporting stolen goods. These statutes would thwart criminals
who committed a robbery in one state and then fled to another
state where they had committed no crime. The bill also allowed
federal agents to carry weapons and make arrests, and it outlawed
machine guns. The laws finally gave FBI director John Edgar
Hoover the tools he had been waiting for since he took over the
bureau in 1924.
In signing the package on May 18, 1934, Roosevelt issued a bit of
a scolding to the media and the public: "Law enforcement and
gangster extermination cannot be completely effective so long as
a substantial part of the public looks with tolerance upon known
criminals ... or applauds efforts to romanticize crime."
Emphasizing the good quys
Hollywood heeded Roosevelt's advice to quit glamorizing the bad
guys. In true Hollywood fashion, in fact, it went overboard. The
Motion Picture Producers Association prohibited its members
from making films about John Dillinger, stating that the decision
was "based on a belief . . . that such a picture could be detrimental
to the best public interests."
^jjftBE/? A new censorship code, established at the end of 1934, effectively
banned gangster movies by prohibiting a long list of things from
( 210 ) De'nS shown on the screen. Those included giving the lead role
V^^/ to a bad-guy character; showing cops being killed; depicting the
crimes of arson, kidnapping, or revenge murders; "flaunting
firearms"; displaying machine guns or other illegal weapons;
and ending the movie without the bad guy being killed or sent to
prison.
Stripped of their most popular genre, some enterprising filmmakers
got around the ban by making pictures about the good guys —
specifically the FBI. Eight such movies were made in 1935. The
most successful was called 'G 'Men, a nickname for federal agents,
or "government men." The film starred James Cagney, who played
a young agent in pretty much the same way he played a young
criminal four years earlier in Public Enemy.
The FBI officially kept all the Hollywood adulation at arm's length
in order to head off charges that it had encouraged the films. But
the bureau's director, J. Edgar Hoover, ate it up. Hoover, who
Chapter 9: Demagogues and Desperadoes
looked and often acted like a dyspeptic owl, had a flair for public-
ity and an intense sense of duty. He played up the seriousness of
— ^ — ^ crime in the period by collecting often inflated and at best unre-
| \ 1T\ /TTSjb/e\itrf[e^atistics from local jurisdictions. "The criminal in
I >/ wJ I— ' Vmerica iV^the march," he solemnly warned in 1934.
As law enforcement hunted down and killed or captured the most
high-profile criminals, Hoover made sure the bureau received ample
credit, no matter what its real role had been. As FBI director until his
death in 1972, Hoover would become one of the most powerful
Americans of the 20th century. He would often use his powers
unethically and possibly illegally. But in the 1930s, he was a hero.
"Pick a small boy these days and ask him who of all the people
in the world he wants to be like," the New York World-Telegram
reported in 1936, "and ten to one he will reply 'J. Edgar Hoover.'"
John Dillinger
"John Dillinger, ace bad man of the world, got his last night — two slugs through his
heart and one through his head. He was tough and he was shrewd, but he wasn't as
tough or as shrewd as the federals, who never close a case until the end."
Thus began the July 23, 1934, International News Service story that capped the
criminal career of the 1930s' number-one "public enemy." Born in 1903, Dillinger got
his start in crime by robbing a grocery store in 1924. His lack of experience showed,
and he was quickly caught and served nine years in prison.
Dillinger made up for lost time when he was released in 1933 by beginning a
14-month crime spree that saw him kill ten men, engineer three jail breaks (once
with a "gun" carved from a bar of soap), escape from two gun battles with police,
and grab more than $265,000 ($4.4 million in 2008 dollars) from various banks.
Dillinger became a folk hero, vaulting athletically over bank counters and seeming
never to lose his cool. After being captured in January 1934, Dillinger posed for pic-
tures with law enforcement officials and then promptly escaped from an "escape-
proof" jail — in the sheriff's new car. During the break, he took two hostages, and
when he released them, Dillinger gave them each $4 for their troubles.
His demise came when a mysterious "woman in red" told FBI agents he would be
attending a movie at a Chicago theater. Two dozen agents and police ambushed
him as he left the theater and gunned him down. Or, as another newspaper story
put it the next day:
"A stiffening corpse in the county morgue and a muddied pool of blood in the filth of
an alley was all that was left today of John Dillinger, arch criminal of modern times.
Dillinger died as he had lived — in a hail of bullets and a welter of blood."
/ Part III: Living Through the Great Depression
Lessons Learned
J 1T\ /Tl|a#efcrraa{T*n between hard economic times and increased crime
I—/ I V/ I—/ V^a^»u\dSem to be a no-brainer. But as the experiences of the
Great Depression show, that's not necessarily so.
Almost every recessionary period in the United States since the
1950s has been accompanied by a rise in crime rates, particularly
property crimes such as robbery and burglary. The factors that
contribute to the increases include
The obvious effects of falling wages and greater unemployment
rates creating a bigger pool of people that may be driven to
commit a crime.
i"* Greater use of alcohol and drugs as an escape, which could
lead to lowered inhibitions to commit a crime, or make
economic situations more desperate.
More vacant stores and houses, which can invite more crime
since there may be fewer potential witnesses.
v0 Smaller police budgets that translate to less law enforcement.
But in the Great Depression of the 1930s, crime rates went up in
the first part of the decade and then steadily declined through the
rest. Sociologists and criminologists theorize that the rise in crime
during the first two or three years was due to a combination of two
things. One was the onset of hard economic times.
The other, and more important, factor was Prohibition: the
nationwide ban on liquor sales that spurred a massive illegal black
market and sparked widespread violence as various criminal
organizations vied for control of the trade. When Prohibition
ended in 1933, crime rates began dropping even though hard times
continued.
But researchers have suggested that another factor besides the
end of Prohibition may have contributed to the drop: the creation
of programs that put people to work (such as the Work Progress
Administration and the Civilian Conservation Corps) and social
safety net services.
A 2007 study by economists from the University of California,
Brigham Young University, and the University of Arizona con-
cluded that "relief spending during the 1930s lowered property
crime in a statistically and economically significant way."
Put another way, if you give people money, or a way to earn it,
they are less likely to steal it.
Chapter 10
Dr°PfiS^uninSpite of It All
In This Chapter
Filling more spare time
Listening to the radio and escaping at the movies
Reading comics and listening to a new sound
Drinking legal liquor and driving around the country
Lessons learned
MM/ hile the tentacles of the stagnant national economy
WW touched all but the wealthiest Americans during the 1930s,
that didn't mean the sun never shone and everyone moped around
waiting for World War II to start and get things moving again. The
economic conditions meant less work, but that also meant more
leisure time.
This chapter covers what people did with that leisure time, from
listening to a lot of radio to going to lots of movies. It covers the
heyday of comic strips and their offspring, as well as how people
entertained their ears. I take a look at the return of legal drinking
with the end of Prohibition in late 1933, and the chapter concludes
with the pastime of driving around the country.
More Time to Play
In 1936, a federal committee formed by President Franklin D.
Roosevelt to study the country's resources reported that in the
previous year, Americans had spent $17 billion on food, $9.5 billion
on housing, $5.25 billion on clothing, $3.8 billion on automobiles,
and $1.6 billion on recreation.
That last figure on recreation spending may seem surprisingly
high, given that people were still in the midst of the most pro-
longed economic calamity in U.S. history. But people had more
time on their hands for recreation — and recreation spending —
precisely because the economy was sailing stormy seas.
1 00 Part "': Living Through the Great Depression
Cutting dotin the utorkufeek
I A |^/-* | 1 .ftta^o|theJ*|feat Depression, a typical U.S. workweek generally
I II II | 1 tnlfcc«J(^tJ^ist a half-day's work on Saturday, and very often a
full day. That meant there were no such things as weekends, at
least not in the modern sense of the term.
^to Hf^ But when hard times hit, many companies reduced their hours of
Wt^q operation or split jobs among workers so that fewer would have to
-KVi be laid off. In 1933, the Roosevelt administration urged employers
V$5>^ to adopt a maximum 40-hours-per-person workweek as part of the
National Industrial Recovery Act's efforts to create more jobs.
By the time the U.S. Supreme Court overturned the act as
unconstitutional in 1935 (see Chapter 13 for details), the five-day
workweek had become a well-established fact for many businesses
and industries. (In 1938, Congress approved the Fair Labor
Standards Act, which mandated a 40-hour-maximum workweek.
The act took effect in 1940.) And fewer hours working meant more
leisure time for millions of Americans.
Finding uses for free time
Because most people were watching every dime, they often looked
for things to do at home, whether it was hobbies such as gardening
or playing games such as contract bridge. (Both activities were
very big in the 1930s.) Other pastimes, like bowling or miniature
golf (also big in the decade), cost a little money.
But whether they were free or for a fee, there seemed to be no
shortage of things to do, even with a depression going on. In 1935, for
example, the new things to do included seeing the first feature-length
Technicolor movie (Becky Sharp ), playing a new board game called
Monopoly, attending a Major League Baseball game at night (at least
in Cincinnati), and drinking beer out of a can. And if you were of a
mind to just stay home and relax, there was always the radio.
When Radio Was Kinq
With the exception of the automobile, probably nothing had a
greater impact on American life in the first half of the 20th century
than radio. Born in the early 1920s, the medium grew up in the
Great Depression and became a member of most American
families — especially when radios got cheaper. Manufacturers
began encasing radios in plastic shells rather than wood, and they
rewired the sets so they didn't require large transformers. Those
changes made them lighter and less expensive.
Chapter 10: Having Fun in Spite of It All ] 01
In 1930, half of U.S. households had radios. By the middle of the
decade, that number was up to 60 percent of households, which
was twice as many as had telephones. By 1939, 86 percent of
/T\ii?e%iL^s^id radios, as did 20 percent of motor vehicles, and
VmapiclnVfcwe listening to the radio an average of 4.5 hours
a day.
A survey by the National Recreation Association in 1937 found that
Americans' favorite pastime was listening to the radio, and social
workers reported radios were often the last possession destitute
people would part with when selling off their household items.
What Americans listened to varied. There were comedy shows,
often hosted by comics who had made the leap to radio from
vaudeville or the movies. There were vivid dramas, which in at
least one case proved too vivid. That was in October 1938, when
Orson Welles and the Mercury Theatre presented a version of The
War of the Worlds that was so realistic it caused a panic among
thousands of people who thought Earth had been invaded by
Martians.
"You know, Orson," President Roosevelt told Welles a few days
after the broadcast, "you and I are the two best actors in America."
People also could listen to real-life drama as it unfolded, such as
the farewell address of the terminally ill baseball star Lou Gehrig,
the abdication of the British throne by King Edward VIII so he
could marry an American divorcee, and the German invasion of
Poland.
Influencing America on
the public airvOaVes
Radio exerted enormous influence on the country, turning
America, as a 1933 study put it, "into a vast auditorium, into all
corners of which a single voice can carry with dramatic ease and
clarity." Radio gave people a commonality of experience that
jumped across family and neighborhood and even regional
boundaries. It sold people things and told people things, and
much of what was said over the airwaves was believed.
"When (people) say 'the radio,' they don't mean a cabinet, an
electric phenomenon, or a man in a studio," wrote essayist E.B.
White. "They refer to a pervading and somewhat godlike presence,
which has come into their lives and homes."
1 02 Part "': Living Through the Great Depression
— ^ |— ^ that thafedera
DropBoafe
All this influence was being exerted over public property. In 1927,
Congress declared that the airwaves belonged to the public and
that thejfederal government had the responsibility to regulate
adcast and on what frequency. In 1934, the Federal
ns Commission (FCC) replaced what had been
called the Federal Radio Commission and became the country's
supervising agency for nonprint mass media.
In the 1930s, the radio segment of the U.S. mass media was
basically four major networks with which three-fourths of the
country's 600 to 800 radio stations were affiliated. The presence of
four coast-to-coast networks (the Columbia Broadcasting Service,
the Mutual Radio Network, and two controlled by the National
Broadcasting Company, NBC "Red" and NBC "Blue") gave
U.S. businesses national avenues on which to advertise — and
they jumped at the opportunity.
Between 1928 and 1934, radio advertising increased 316 percent,
even as newspaper ads were dropping 30 percent and magazine
ads 45 percent. By 1938, according to an FCC survey, one-third of
radio time was devoted to commercials; one-third to music; and
the rest to news, sports, religious shows, talk shows, comedies,
and dramas — many of which were aimed at women and called
"soap operas" because their sponsors often sold cleaning products.
Most shows had a single sponsor, and the show's star often was
the product's primary pitchman. That situation resulted in products
and characters or celebrities sometimes becoming fixed together
in the public's mind, such as Ovaltine drink mix with Little Orphan
Annie, Pepsodent toothpaste with "Amos 'n Andy," and Jell-0
dessert mix with Jack Benny.
Radio ads were generally short and snappy, often with clever
and annoyingly hard-to-forget jingles, and sometimes they made
audaciously ludicrous claims:
V Cigarettes could ease digestion.
Business careers could be ruined by not shaving closely
enough.
V Mouthwashes could kill "up to 86.7 percent of germs" (though
apparently never more than that).
Many ads also featured tie-ins, in which listeners were invited to
write in for free samples or other "gifts." That allowed advertisers
to measure how well their message was getting across.
Chapter 10: Having Fun in Spite of It All / (?3
Politicking o</er the air
DropBM<$
campaign bud)
icians figured out the potential of radio to influence
928, 20 percent of the Republican Party's presidential
campaign budget was for radio ads — the party's single largest
expense. In 1932, the GOP bought 42.5 hours of airtime for political
messages and speeches, while the Democratic Party bought 51.5
hours.
In 1936, Republicans set aside $1 million for radio advertising, and
an adviser wrote to GOP presidential candidate Alf Landon that
"the handling of Republican publicity should be on the same basis
as the handling of any other article that wants to be merchandised
to the public." (It didn't help much; Landon was crushed by
Roosevelt.)
Political parties weren't the only ones to recognize the potential
and power of radio. Individuals such as Father Charles Coughlin
and Louisiana politician Huey Long (covered in Chapter 9) used
the radio as a pulpit from which to bash their opponents and
extol the magnificence of their own ideas. But the most successful
exponent of political persuasion over the radio was Franklin D.
Roosevelt.
On Sunday, March 12, 1933 — eight days after taking over the
Office of the President — Roosevelt sat before the fireplace in the
Diplomatic Reception Room of the White House and addressed the
nation over all of the radio networks.
It was the first of what would be 30 "fireside chats" during his
12-plus years as president. (The "fireside chats" name was suggested
by a radio executive.) In all of them, FDR would speak as though
he were just talking with neighbors over coffee and pie, never
patronizing his audience even when explaining complex issues.
As humorist Will Rogers put it after the first fireside chat on the
country's banking problems: "Our president took such a dry
subject as banking (and) made everybody understand it — even
the bankers."
The chats were also an important political tool for Roosevelt. They
allowed him to put his agenda before the country without filters,
which was particularly helpful because most of the country's major
newspapers and newspaper chains opposed both the president and
the New Deal and routinely editorialized against them.
/ 61} Part III: Living Through the Great Depression
Dro
I _ "Sbhhhhl'Amos'nAndy'ison!''
l^[i9^li^ums/rltffki*Mifluence more evident during the Great Depression than
from 7:00 to 7:15 (EST) every evening except Sunday. Movie theaters would stop
their films and pipe in the NBC Red network; department stores would crank up
their radios; the number of phone calls around the country would drop by 50 per-
cent. And millions of Americans — including President Roosevelt — would drop
whatever they were doing and listen to two white actors pretend to be two persis-
tently optimistic black men who ran a one-cab taxi company and repeatedly failed
at get-rich-quick schemes.
At its peak in the mid-1930s, "Amos 'n Andy" drew an audience estimated at 40
million — about one-third of all Americans. It was the equivalent of a Super Bowl
TV audience, only it tuned in six nights a week, week in and week out. The show
was so popularthatthe network eventually began rebroadcasting each segment at
11:30 p.m. (EST) so people on the West Coast could hear it in prime time.
"Amos 'n Andy" was far more than a radio show. It made people smile during a
period where there wasn't a lotto smile about, and it served as a unifying force by
giving perfect strangers something in commonto discuss. Itsimpactwas reflected
in a comment by the noted British playwright George Bernard Shaw during a 1933
tour of the United States. "There are three things which I shall never forget about
America," Shaw said, "Niagara Falls, the Rocky Mountains, and 'Amos 'n Andy.'"
Not everyone was smitten by the show. The Pittsburgh Courier,the country's most
influential African American newspaper, gathered 740,000 signatures on a petition
to have "Amos 'n Andy" pulled off the air for what the petition said were offensive
racial stereotyping and propagation of racist attitudes toward African Americans.
But the protests fell on deaf ears. "Amos 'n Andy" continued in various forms on
the radio until 1960.
Trading Real Life for Keel Life
If radio had a rival in the Great Depression, it was movies. Radio
had the advantages of being free and readily accessible. But
movies offered pictures to go along with the sound. And the
darkened environment of the theater afforded customers at least
the facade of anonymity and a place for many people to dream of
other lives.
"Each day, millions of men, women and children sit in the
windowless temples of the screen to commune with their
vicarious friends and lovers," observed writer Leo Rosten.
Chapter 10: Having Fun in Spite of It All /
The relative newness of talking pictures (movies with sound, which
debuted in late 1927) helped the movie industry keep the Great
— ^ — ^ Depression at bay for a short time. But by 1933, ticket sales had
J }TC\ 1T\ fsT%i/p\<Wfc©80 million a week in 1930 to 60 million. The cumulative
I V/ I— J Vwu*^Ps\lWrof the five major studios — RKO, Paramount, Warner
Brothers, Metro-Goldwyn-Mayer, and 20th Century Fox — fell from
about $1 billion in 1929 to less than $200 million in 1933.
Filling the seats
To combat declining ticket sales, theater owners cut their prices
from 50 cents to 25 cents for adults and 10 cents for kids. (That's
$3.93 and $1.57 in 2008 dollars.) Owners also looked for extras
they could add to their product. The extras included cartoons,
abbreviated films called shorts, newsreels, or a combination of
these. Gradually, the double feature became standard. It usually
teamed an "A" picture with recognizable stars and big production
values with a "B" picture featuring secondary actors and bargain-
basement production values.
Theater managers also added nonscreen extras. Popcorn, candy,
and soda, once thought to be a nuisance because of the cleanup
involved, became theater necessities when owners realized they
could make more off food concessions than off admission tickets.
In the winter of 1932-33, a Colorado theater manager came up with
something he called "Bank Nights" to stimulate attendance on the
slowest nights at the box office, usually Mondays and Tuesdays.
Patrons wrote their names in a book in the lobby, alongside a
number. Tickets with corresponding numbers were put in drum,
a ticket was drawn at intermission, and some lucky patron won a
cash prize, usually around $150 (about $2,400 in 2008 dollars).
Variations on the game featured prizes that ranged from china to
livestock. By the end of 1937, it was estimated that 5,000 theaters
were hosting weekly promotions like Bank Night, giving away
prizes totaling $1 million.
The extra screen features, the snacks, and the promotions,
combined with films that were generally better made than those
of an earlier decade, got people going to the movies again, as
reflected in the Figure 10-1 photo.
By 1938, the average family spent $25 a year on movie admissions,
and there were 1,700 movie theaters at which to spend it. That was
double the number of hotels in the country and triple the number
of department stores.
/ 00 Part "': Living Through the Great Depression
DropB
Figure 10-1: People flock to the Astor Theatre in New York to see the movie A
Free Soul.
Weekly movie ticket sales reached 86.5 million by the end of the
1930s. That was the equivalent of two-thirds of the country going
to the movies every week. In contrast, combined ticket sales for the
United States and Canada in 2007 equaled about 26.9 million tickets
a week, the equivalent of less than 8 percent of the two countries'
populations going to a weekly movie.
Keeping it clean
Sensitive to criticism in the early 1930s that it was portraying
too much sex and violence on the screen, Hollywood voluntarily
began to censor itself, particularly when it came to sex. In 1934,
the Motion Picture Producers and Distributors of America began
requiring films to have a "certificate of approval" from an industry-
created censorship board that had been created in 1930.
The board established a fairly rigid code of do's and don'ts:
Married couples had to have twin beds.
C" Gangsters couldn't be shown living the high life, even if they
were gunned down later on.
Words such as sex, God, and hell were forbidden.
Chapter 10: Having Fun in Spite of It All ] 07
(Producer David O. Selznick had to get special permission so that
Clark Gable could utter the famous line "Frankly, my dear, I don't
give a damn" at the end of Gone with the Wind.}
— ^ ^ give a damn a
rroaucinq the stuff of dreams
Film historians and movie buffs often refer to the 1930s as
"Hollywood's Golden Age." It was certainly one of the film industry's
most prolific periods. As many as 5,000 films were made during
the decade, spurring one critic to call it "Fairyland on a production
line."
The quantity of films produced assured there would be a wide
variety of genres. Gangster films were an early favorite in the
decade (see Chapter 9). Lavish musicals, such as 42nd Street and
Footlight Parade, brought sparkle to the screen, even if they were
black and white. There were film biographies (The Story of Louis
Pasteur, Voltaire), horror films (Dracula, Frankenstein, and King
Kong), and adventure flicks (Robin Hood, The Lives of a Bengal
Lancer). And late in the decade, there were epic Technicolor films
like Gone with the Wind and The Wizard of Oz.
Not everyone was enamored with the influence of movies on the
American public during the period. In a 1936 Harper's Magazine
article, critic Ruth Suckow complained that films too often sugar-
coated life and resulted in too much hero worship of actors.
"(Movies) have come to represent certain national ideals, reduced
to the lowest common denominator," she wrote. "For that is what
the screen does — it reduces while it magnifies, grinds down what
it exalts into the typical."
But others have contended that movies during the period gave
people not only an avenue of escape but also feelings of hope.
"American movie audiences, escaping from the realities of the
Depression outside the movie theater, withdrew inside to see
human grit triumph over suffering and human kindness triumph
over financial, political and moral chicanery," wrote film historian
Gerald Mast. "If the optimism of Hollywood films provided the
audiences with the tranquilizer it needed, it also strengthened the
audience's belief that eventually good people would make bad
times better."
That optimism was reflected in a 1933 film song that became
something of an anthem for Americans, not only when facing
the grimness of the Great Depression but also in the succeeding
decade when facing totalitarian countries in World War II. The
song was "Who's Afraid of the Big Bad Wolf?" from Walt Disney's
The Three Little Pigs.
/ 08 Part "': Living Through the Great Depression
More Fun for the Eyes and Ears
DropBostes
d movies dominated the leisure time of most
ing the Great Depression, they were by no means the
only pastimes to occupy the senses. Light reading, of things such
as comics, comic books, and magazines, was also popular. And
Americans found other ways to listen to music besides on the radio.
Reading comic strips
and their offspring
Comic strips had been a part of U.S. newspapers since the late
19th century, but they really came into their own in the late 1920s
and early 1930s. Unlike their 21st-century counterparts, one comic
strip could take up an entire page of a Sunday comics section, and the
story lines tended to be more drawn out and convoluted. Newspapers
were happy to provide the space because the strips were consistently
at or near the top of best-read features in subscriber surveys.
^jj*BE# Modern comic readers would find many familiar names in the
&f$ \ comic strips that populated newspapers of the 1930s, such as
V Mai ) M^key Mouse, Donald Duck, Dick Tracy, Tarzan, Blondie, and
^55^ Little Orphan Annie. A few less familiar figures emerged in that
period as well: Flash Gordon, Secret Agent X-9, Buck Rogers, L'il
Abner, Mandrake the Magician, and Terry and the Pirates.
Comic strips had the same appeal during the Great Depression as
radio, movies, and other leisure-time activities, serving as respites
from reality for adults and opening new worlds of imagination for
children.
Critics took a less kindly view. In a 1937 article in the Saturday
Review, Lowell Thompson complained that comics were too
violent and full of cruel humor. "A tolerant contempt for the average
man," he wrote, "has ousted a spread-eagle faith in democracy."
But Thompson was decidedly in the minority. Comics were so
popular that they often spun off into other media, such as radio
shows, feature films, and movie serials. A kid could listen to Flash
Gordon on the radio Saturday morning, watch him at the movies
Saturday afternoon, and read about him in the Sunday comics.
Chapter 10: Having Fun in Spite of It All /
Leapin' lizards!
e Harold Gray created a comic strip featuring the adven-
tures of a small girl named Little Orphan Annie. The redheaded kid had a dog named
Sandy, a favorite saying ("Leapin' lizards"), and eventually a foster father named
Oliver "Daddy" Warbucks.
The strip was fabulously successful (it was reported to be President Herbert
Hoover's favorite). By 1934, Gray was reportedly making $100,000 a year from the
strip and another $50,000-plus from a radio show featuring the characters.
At first aimed at children as a humorous strip, and then at older audiences as an
adventure comic, "Annie" also served as a vehicle for Gray's conservative/libertar-
ian political views. "Daddy" Warbucks was an unabashed champion of capitalism
and a powerful tycoon who was not above meting out justice on bad guys without
all the trouble of a court trial.
Gray hated President Roosevelt and Roosevelt's New Deal policies. How much?
In 1944, despondent at FDR having won a fourth presidential term. Gray killed off
Daddy Warbucks with a mysterious disease, implying there was no longer room in
the country for capitalists. After FDR himself died in April 1945, Gray resurrected
Warbucks a few months later. Asked why, Gray smirked that "the situation changed
last April."
Dro
The comics also spawned new forms of reading material during
the period. There were comic books, the first modern version of
which was born in 1933. Called Famous Funnies, it was a collection
of comic strip reprints that was given away as a promotion by a
cleaning products company.
The comic strips also gave birth to Big Little Books. These were
squat cubes of cardboard and paper, measuring about 4 inches by
4 inches and containing several hundred pages of big print and
pictures. They were designed for kids and included most of the
major comic strip characters, as well as adventure stories.
A slightly more sophisticated version of the comic book was the
pulp magazine, so called because of the cheap wood pulp paper on
which it was printed. The pulps featured fewer pictures and more
words than comic books and usually focused on a specific genre,
such as Westerns, detective stories, or horror. And they sometimes
featured writers who were destined for greatness in other literary
forms, such as playwright Tennessee Williams and novelist Sinclair
Lewis.
/ "JO Part III: Living Through the Great Depression
Sitiinqinq to a nert sound
I A |^ — ^ I 1 ^At tlm. tfeflinu^ng of the Great Depression, popular music was
j Ij 11 1 J KlMinp|6^^what has been referred to as the "country club"
sound: Full orchestras, with carefully balanced horn and string
sections, produced music to soothe — or stupefy — an audience.
Such music filled radio airtime okay, but it didn't sell records,
particularly in an economy without a lot of disposable income. In
fact, the uninspired music and the rapid rise of radio combined
with the hard times to almost kill off the record industry. Between
1927 and 1932, record sales fell from 104 million per year to 6
million. The entire music industry went from a $50-million-a-year
concern to a $250,000-a-year basket case.
v^tOHf^ That changed on August 21, 1935. A 25-year-old clarinet player
4^A-^J~\ and bandleader named Benny Goodman was performing with
~ ylrs/ orchestra at the Palomar Ballroom in Los Angeles. Bored and
V^2>^ depressed because the group's cross-country tour had been a flop,
Goodman decided to "swing" in the last set, playing up-tempo and
improvised stuff the musicians usually saved for after-hours jams.
The crowd went nuts for the new sound, which was really a
derivation of jazz that black musicians had been playing for years.
"A good swing band, smashing away at full speed, with the
trumpeters and clarinetists rising in turn . . . and the drummers
going into long drawn-out rhythmical frenzies could reduce its less
inhibited auditors to sheer emotional vibration," wrote historian
Frederick Lewis Allen.
Some thought the music was a health hazard. A psychologist told
The New York Times that swing music was "dangerously hypnotic"
because it was "cunningly devised to a faster tempo" than the
average adult's pulse rate of 72 beats per minute.
Despite such worries, swing music swept the country, and
Goodman's band was soon joined by groups headed by Tommy
and Jimmy Dorsey, Glenn Miller, Bob Crosby, Duke Ellington,
Count Basie, Harry James, and Artie Shaw.
Record sales rebounded to 35 million in 1938, and records were the
best-selling Christmas gift that year. In addition to the popularity of
the swing sound, several other factors came into play:
v0 Radio-phonograph consoles: These items featured both a
radio and a phonograph and became popular because they
offered listeners an option when they wanted to hear a
specific song.
Chapter 10: Having Fun in Spite of It All / 7 /
r""N l to unintei
DropBoems
v* Jukeboxe
Radio commercials: As radio ads became more numerous,
they became more irritating for people who wanted to listen
to |ininterrupted music. The consoles allowed an easy way to
records.
Jukeboxes: By the end of the 1930s, an estimated 325,000
bars, cafes, and other spots had record machines in which
customers could drop a nickel and hear their favorite tune.
The "jukes" used a lot of records.
Drinking and Driving
On January 16, 1920, the Eighteenth Amendment to the U.S.
Constitution took effect. Popularly known as Prohibition, the
amendment made it illegal to make or sell alcoholic beverages
in the United States. But it didn't take long to see that the idea of
making America a better place by banning booze was a flop.
There is some statistical evidence that Americans drank less after
Prohibition than they did before it began. But Prohibition also
fostered illegal activity on the part of otherwise law-abiding
citizens; gave criminals a monopoly on a lucrative industry; and
added to a general disrespect for law and order.
By the third year of the Great Depression, two more pragmatic
arguments against Prohibition had been added:
A legal liquor industry would mean new, legitimate jobs.
f A legal liquor industry presented an opportunity for govern-
ments to raise revenues through taxes on alcoholic drinks.
In the 1932 presidential race, the repeal of Prohibition was not
much of an issue. Democratic candidate Franklin D. Roosevelt
favored repeal, while Republican candidate Herbert Hoover
favored at least letting the states decide. But Prohibition was still
a controversial enough issue that it dominated as many local and
state races that year as the hard economic times did.
Brinqinq back legal booze
In February 1933, Congress submitted the question of repeal to
conventions called in each state. While waiting for the necessary
three-fourths of the states to vote for repeal, new President
Roosevelt signed a law in his first month in office that allowed the
sale of two types of liquor: beer with an alcoholic content of up to
3.2 percent, and light-alcohol wines. "I think this would be a good
time for a beer," FDR grinned after signing the measure.
72 Part l": Living Through the Great Depression
At 3:33 p.m. (Mountain Time) on December 5, 1933, Utah became
the 36th state to ratify the Twenty-First Amendment, thus repealing
Prohibition. Nationwide, people celebrated with a drink or two.
Prohibition. Na
everywhere. Legal alcohol was in short supply,
leaving much of the country's liquor in the hands of bootleggers.
"Liquor has been sold illegally for 13 years," New Jersey Governor
A. Harry Moore observed, "and it will not hurt if this is done for a
few days more."
Drinking also did not become legal everywhere. The amendment
allowed states and counties to decide for themselves if they
wanted to allow the sale of alcoholic beverages. Fifteen states
made selling liquor an exclusive state government monopoly. But
only eight states chose to stay dry altogether, leaving 40 states
where people in the Great Depression had something else to spend
their recreation dollars on.
Tourinq America
"We are," noted humorist Will Rogers in 1931, "the first nation in
the history of the world to go to the poor house in an automobile."
As was customary with Rogers' witticisms, this one had a large
chunk of truth in it. Even in the depths of the Great Depression,
Americans never lost their love for the automobile. At the beginning
of the depression in 1929, there were 26.8 million registered vehicles
in the country. In 1941, there were 38.9 million, a 45 percent
increase during hard times. In 1937, half of U.S. families owned
cars, and a New York City auto show that same year featured an
impressive 200 models of cars, trucks, and even a few car-trucks.
Researchers looking at the spending and social habits of Muncie,
Indiana, residents found that car ownership "was one of the most
depression-proof elements of the city's life ... far less vulnerable,
apparently, than marriages, divorces, new babies, clothing, jewelry
and most other measurable things, both large and small."
^■viMfj One reason it was easy to stay in love with cars is that cars were
^ becoming easier to love. Improvements in suspension, brakes, and
tires made cars safer, more comfortable, and more reliable in the
1930s than a decade earlier. At 5 to 10 cents a gallon (79 cents to
$1.58 in 2008 currency), gasoline was still relatively cheap. And
more and more cars were equipped with amenities such as radios.
Sunday drives to the beach or into the countryside were favorite
pastimes: "Give Americans a one-piece bathing suit, a hamburger,
and five gallons of gasoline," Rogers observed "and they are just as
tickled as a movie star with a new divorce."
Chapter 10: Having Fun in Spite of It All / 73
DropB
While foreign travel by Americans dropped, "touring" trips around
the United States became popular in the 1930s, especially to
national parks and monuments, which saw a 400 percent increase
rh^veen 1935 and 1939. Gas stations and lunch rooms
y%*K*side the nation's highways, along with motor
hotels — motels — which were hybrids of urban hotels and rural
motor camps.
Coupled with the forests of billboards that sprang up, the mass of
roadside conveniences transformed U.S. highways, in the words of
one critic, "into the ugliest spots on earth." Maybe. But at least this
type of travel was affordable.
Lessons Learned
The Great Depression changed the way many Americans looked
at work and its relation to life. The long-held ideal that hard work
guaranteed success was a bit hard to swallow for the guy who
had worked diligently for 20 years, only to find himself suddenly
unemployed — and unemployable — when times got hard.
That, in turn, changed how he felt about leisure time. There was
less guilt about enjoying one's self and more enthusiasm in finding
ways to do it. Oh, and Americans managed to maintain their love
for the automobile throughout the 1930s.
Here's a look at how leisure time stacked up in the early 21st
century — and how the country's love affair with cars became
more of a love-hate relationship.
Changing hou! We spend leisure time
"We work," the Greek philosopher Aristotle wrote, "to have leisure."
In the United States of the 21st century, Aristotle's observation
may be more accurately worded, "We work to have leisure by
ourselves."
In the 21st century, leisure time takes a much different form than
it did in the Great Depression. In the 1930s, hours away from work
were more compartmentalized. For the most part, people worked
from a set time to a set time on set days. That meant it was fairly
easy to schedule social activities with friends and family.
In contrast, studies have found that modern leisure time tends to
be more fragmented. In a 2008 Harris poll, people estimated they
had lost four hours of weekly leisure time from the year before,
while at the same time estimating they were working only one hour
Part III: Living Through the Great Depression
^ — ^ on thinas at wo
DropBoems
longer per week. Researchers theorized the difference was "gray
hours," where people weren't physically at work but were checking
on things at work via home computers, cellular phones, or personal
ts (PDAs).
The proliferation of wireless communication devices makes it
simultaneously easier and harder to be away from work. It also
makes it more likely that Americans will use their leisure time
in smaller chunks. That means leisure time is becoming more
individualized and less communal. A 2006 survey, for example,
found that 75 percent of respondents would rather watch a movie
at home than at a theater, mostly because they were "too busy" to
go to the theater.
The privatization of leisure time was also reflected in a 2007 study
of leisure time use by the U.S. Bureau of Labor Statistics. The
survey found that the average American enjoys just under five hours
per day of leisure time and spends 2.6 hours watching television,
compared to 38 minutes socializing or talking with others.
Spending time in traffic
The traffic engineer Henry Barnes once said, "Traffic is the
mother-in-law in the otherwise perfect romance between
Americans and their automobiles."
The "mother-in-law" is much harder to ignore these days than
it was in the 1930s. There were 247.3 million motor vehicles
registered in the country in 2007. That translates to about 1.3
Americans for each vehicle, compared to 3.3 people per registered
vehicle in 1940.
More vehicles means more traffic, and more traffic means
significant losses of time and money, as reported by a 2005 study:
V Drivers snarled in traffic burned 2.9 billion gallons of wasted
fuel, enough to fill 58 supertankers.
Traffic jams consumed 4.2 billion hours of time.
r* The wasted time and fuel carried a price tag of $78 billion, a
420 percent increase from 1982 figures.
The study concluded that drivers in urban areas waste the
equivalent of one week per year in traffic. That's a fair chunk of
leisure time!
Chapter 11
Dr°PB?flte? RisingTunions in
the Great Depression
In This Chapter
Taking a beating before the Great Depression
Getting a new deal from Washington
Splitting the labor movement
Striking — and getting struck
Lessons learned
■ abor unions embarked on a roller coaster ride of highs and
Allows from just before World War I to just before the onset of
the Great Depression. They were nearer the bottom than the top
when the economic hard times hit. The 1930s proved to be even
more chaotic than the 1920s for organized labor, but this time the
decade ended with U.S. workers higher than they had ever been.
This chapter examines labor's story from the entry of the United
States into the world war in 1917 to the beginning of the Roosevelt
administration in 1933. 1 then take a look at what Roosevelt did,
and didn't do, for labor and how the labor movement split itself in
two. The chapter ends by recounting some of the biggest — and
bloodiest — strikes in U.S. history. Put on a hardhat and grab a
picket sign; it's going to be a bumpy ride.
Disorganized Labor
Even before the United States entered World War I in April 1917,
organized labor had pledged to be a good patriot. In March that
year, 79 unions promised "full labor support" once the country
was in the war, as long as basic union rights were protected. The
federal government, in turn, agreed to enforce union standards in
all government contracts.
176
Part III: Living Through the Great Depression
Despite the mutual pledges of cooperation, however, 4,450 strikes
occurred by the end of 1917, involving 1 million workers. The
cause oj most of the disputes was that wages were not keeping
iufr^ftig wartime prices.
So government officials and union representatives conferred
again and agreed in April 1918 that a new agency was needed to
try to head off strikes. The government established the National
War Labor Board, which served as an arbiter in labor-business
disputes. The government also promised that in its contracts with
companies it would insist on eight-hour workdays (as much as
possible), on the recognition of workers' right to organize, and
on equal pay for equal work for the increasing number of women
entering the workforce.
Even without the government guarantees, organized labor had
reason to smile during the war. As the large number of workers
entering the military made the civilian labor market tighter, wages
rose, and so did union membership — from about 3 million in 1916
to 4.1 million in 1919 and 5 million in 1920.
But as prices continued to rise even after the war ended, wages
again lost ground. The result was more than 3,500 strikes in 1919.
A multi-union strike in Seattle virtually paralyzed the city for
four days. In Boston, most of the city's police force walked out.
Steelworkers and coal miners also staged widespread strikes.
The steel strikes were broken by the companies using replacement
workers (sneeringly referred to as scabs), and by companies'
propaganda that alleged the strikers were part of a communist
conspiracy to overthrow capitalism. The coal strikes were stopped
when a federal court issued an injunction against the strikers for
engaging in work stoppages that threatened national security.
Losing ground in good and bad times
In 1920, the country ran into a post-war recession. By the time it
ended in 1922, 5 million people were out of work. As usual when
unemployment is high, union membership sagged, dropping from 5
million in 1920 to 3.5 million in 1923.
But a curious thing happened when the country began to pros-
per again: Union membership continued to sag. One reason was
that technological and organizational improvements had greatly
increased the productivity of the average worker. That meant
fewer workers were needed to produce the same amount of goods.
That, in turn, resulted in unemployment rates staying fairly high
during the decade of the 1920s, even when the economy improved.
Chapter 11: Labor Rising: Unions in the Great Depression / "J "J
DropBe'
Another reason union membership stalled was that many employers
insisted on open shops, which meant that workers did not have to
join a uaion and that no union had exclusive rights to deal with
cSefc^i^^n behalf of workers. Some companies also insisted
4reif w$«^called yellow dog contracts, which new workers were
forced to sign. The contracts forbade the workers from joining a
union, thus reducing their rights to those of a "yellow dog."
Employers also co-opted unions by embracing the idea of welfare
capitalism. The term referred to the practice of companies offering
benefits to workers (often in lieu of pay raises) that ranged from
company-sponsored social clubs to profit-sharing programs.
Workers could buy company stock at a discount, or they received
it as a bonus for good work. By 1926, some 600 companies had
established employee representation plans, which in effect were
company unions operated by the personnel department that
provided at least the veneer of someone looking out for the
workers' welfare.
"The assertion may be boldly made that the decreasing membership
in most of the unions, and the great difficulty they are experiencing in
holding their members together, is due to the fact that the
employers — the so-called 'soulless corporations' — are doing
more for the welfare of workers than the unions themselves,"
boasted an official of the National Association of Manufacturers.
Exposing management's dark side
Of course not every company or every industry took a paternal
interest in its workers. Many companies relied on spies placed
among workers to help the firms weed out union organizers. Some
companies conspired with corrupt union leaders to pad the leaders'
pockets, in return for the union bosses ensuring rank-and-file
members didn't resort to job actions such as slowdowns or strikes.
Working conditions were often appalling. Steel mill workers averaged
workweeks of 69 hours. One Pittsburgh steel mill safety manager
admitted in 1928 that the mill "had a lot of equipment that is out
of date, lacks the new safety devices and is liable to break down at
any time, causing serious accidents." But, he added, management
wouldn't replace it because it still worked.
That kind of attitude led to huge numbers of worker casualties.
In one year, the steel industry averaged 63 injuries a day, four of
them resulting in death or permanent injury. It was common for
steelworkers' clothes to catch on fire; if they survived, they had to
pay to replace them.
/ 7$ Part III: Living Through the Great Depression
DropB^ife
Some companies made no pretense of having benevolent feelings
toward their employees. When a congressional committee asked
Pittsbuigh Coal Company chairman Richard B. Mellon why the
machine guns mounted at its coal pits, he replied,
the mines without them."
Sinking With the economy
By 1929, union membership had sunk to 3.4 million, lower than
at any time since 1917. While corporate profits had grown by
62 percent in the decade, wages had risen only 8 percent. That
meant workers were ill prepared for the economic Armageddon
that followed the October 1929 stock market crash.
In fact, they appeared shell-shocked. As unemployment rose and
paychecks shrank, U.S. workers grew decidedly less militant.
Companies pledged not to cut wages and then ignored their
pledges. The fringe benefits of "welfare capitalism" were rescinded.
Still, there were few strikes. Organized labor made little attempt to
pressure the federal government into launching recovery programs,
nor did it strenuously object when companies unilaterally cut
wages.
"Today labor stands patient and hopeful," noted the Cleveland
Plain Dealer. "Never before has there been a period of depression
so free from labor strife ... in the face of enormous hardship, labor
has showed its good citizenship and sturdy American stamina."
By early 1933, the 110-union American Federation of Labor (AFL)
was losing 7,000 members a week, and overall union membership
dipped below 3 million. What was left of organized labor looked to
Washington, D.C., to see what a new president could do for them.
A Aleut beat far Workers
During the 1932 presidential contest between incumbent Republican
Herbert Hoover and Democratic challenger Franklin D. Roosevelt,
most labor groups, including the American Federation of Labor,
officially stayed neutral.
That didn't stop most rank-and-file workers from wholeheartedly
embracing Roosevelt. The wealthy Roosevelt promised not to
forget "the forgotten man at the bottom of the economic pyramid."
He campaigned for direct government relief to struggling families
and stated his support for an unemployment insurance program.
All that warmed the hearts of working people.
Chapter 11: Labor Rising: Unions in the Great Depression /
"I am a long ways from you in distance, yet my faith is in you," a
South Carolina textile mill worker wrote Roosevelt. "My heart is
am for you, sink or swim."
sn't necessarily mutual on FDR's part. He was more
interested in improving workers' economic status than their
workplace status, and his feelings were more paternal than fraternal
when it came to unions. That reality may have been reflected by
the fact that his Secretary of Labor, Frances Perkins, was a social
worker by training, not a union activist or official.
Even so, Roosevelt enjoyed strong labor support throughout the
Great Depression. In his reelection campaign in 1936, labor groups
formed a political action committee called the Non-Partisan League
to help. Unions contributed nearly $800,000 to his campaign, about
$500,000 of which came from the United Mine Workers (UMW).
The UMW was headed by labor's leading figure in the 1930s, John
L. Lewis. After Lewis and Roosevelt had a falling out over remarks
FDR made about a 1937 steel strike, Lewis withdrew his support
of the president and endorsed FDR's GOP rival, Wendell Willkie, in
1940. Even with Lewis's defection, however, Roosevelt won third
and fourth terms with strong labor backing.
In return, Roosevelt backed several key pieces of pro-labor
legislation during the Great Depression, although not all with
the same enthusiasm.
Section 7(a): Supporting
the right to unionize
In June 1933, Congress passed the National Industrial Recovery Act
(NIRA). Among the bill's provisions (the rest of which are covered
in Chapter 13) was Section 7(a). This section contained three key
provisions having to do with labor:
Employees had the right to organize and to bargain as a group
without employer interference.
No new employee could be made to join a "company union" or
be prohibited from joining any union he or she chose.
Companies would agree to minimum wages, maximum
workweeks, and other workplace conditions, to be established
by the industry to which they belonged and approved by the
president. While industries worked on their own codes, they
were asked to agree to a minimum wage of 40 cents per hour
and a 40-hour maximum workweek, as well as the abolition of
child labor under the age of 16.
/ SO Part "': Living Through the Great Depression
^fiORDf "In my inaugural," Roosevelt said after signing the bill, "I laid
*/fC^v^ down the simple proposition that nobody is going to starve in this
country It seems to me to be equally plain that no business which
i0?jn^!\ll^n^ying less than living wages has any right to continue."
Union leaders were ecstatic with the NIRA. Union recruiters
worked overtime to sign up new members. John L. Lewis, the
United Mine Workers president, had sound trucks blare "the
president wants you to unionize ... it is your patriotic duty to
unionize." People did. The AFL claimed to have added 1.5 million
workers, the United Mine Workers 300,000, and the International
Ladies Garment Workers Union 150,000.
The joy was short-lived. Some employers coerced workers into
joining company unions and declined to negotiate with other unions.
With what Time magazine said were 7,000 different industries
drawing up codes and more than 10,000 pages of federal regulations,
the program's framework became a hopeless snarl. Employers
thought it went too far; labor decided it didn't go far enough. A
National Labor Relations Board was created in 1934 and charged
with settling disputes. But it lacked the authority to enforce its
decisions, and in 1935 the U.S. Supreme Court made the issue moot
by overturning the NIRA for being unconstitutional.
The Wagner Act: Giving
unions real strength
While the NIRA had proved to be a mess, its rejection by the
Supreme Court left labor without any meaningful legal protections.
That situation changed within six weeks of the court's decision,
however, when Congress passed the National Labor Relations Act
and Roosevelt signed it into law on July 5, 1935.
Better known as the Wagner Act (after its chief author, Senator
Robert Wagner of New York), the measure guaranteed the rights
of workers to form their own union. It specifically prohibited
employers from interfering in any way with worker organizing, and
it required companies to bargain exclusively with whatever union
workers voted to join.
^jto Hfi^ Most importantly, it created a new National Labor Relations Board
yr^T\ (NLRB) to monitor union elections, hear complaints about unfair
K^2^ labor practices, and issue "cease and desist" orders that could be
x§Ev^ appealed to a federal court.
Chapter 11: Labor Rising: Unions in the Great Depression 1 SI
"By preventing practices which tend to destroy the independence
of labor, it seeks for every worker within its scope, that freedom of
choice |nd action which is justly his," said Roosevelt, who was not
bill until he saw how popular it was with Congress
One thing the act did not do was set any standards for wages or
hours. Nor did it require employers to sign a contract with a union.
Still, the measure was a huge triumph for labor, perhaps the biggest
in U.S. history. For more than a century, the labor movement in
the United States had struggled against a host of obstacles that
blocked its right to organize in a meaningful manner. Now it had
that right. The measure also firmly established the role of the
federal government in relations between labor and management.
Many legal experts expected the Supreme Court would overturn
the Wagner Act as it had the National Industrial Recovery Act.
As a result, many employers ignored the law. The National Labor
Relations Board conducted only 76 elections between 1935 and
1937. But the court upheld the act in April 1937, and between 1937
and 1940, the NLRB supervised 3,310 elections.
The Fair Labor Standards Act:
Raising Wages, cutting hours
Two issues that weren't settled by the Wagner Act were establishing
a federal minimum wage and setting a limit on how many hours an
employee could be required to work without extra compensation.
One reason for these omissions was that starting in 1918, the
Supreme Court had rejected several minimum wage laws as
unconstitutional. Another was that some labor groups feared that
adopting a minimum wage would give employers an excuse to use
it as a maximum wage too. Southern lawmakers were afraid that a
minimum wage law would remove the region's only attraction for
industry: its low wages. And conservative members of Congress
thought the idea was the next big step on the way to socialism.
But Roosevelt had made the issue part of his 1936 reelection
campaign and was determined to push a bill through. When
Congress failed to act in the summer of 1937 (even after the
Supreme Court had made an about-face and had found a state
minimum wage law constitutional), FDR summoned lawmakers into
special session in late 1937.
/ $ 2 Part l": Living Through the Great Depression
^ ^ amendments, m
DropBodes
A bill — the Fair Labor Standards Act — was finally approved in
June 1938, but not before it endured 72 amendments or proposed
amendments, most of them aimed at narrowing how many industries
ted by the bill. One congressman joked that if the
d, the Secretary of Labor should be required to
report within 90 days "whether anyone is covered by the bill."
^to Hf^. In fact, the final version of the bill applied to industries that covered
' only about 20 percent of the workforce. It set an initial minimum
hourly wage of 25 cents (which was to move to 40 cents in 1940),
and workweeks were limited to 44 hours (decreasing to 40 hours in
1940). Extra hours required pay at time-and-a-half rates.
Just as importantly, the bill set 14 as the minimum age for workers
outside school hours and 16 during school hours. Children had
been shamefully exploited during the Great Depression. A 1938
survey of 449 children by the Department of Labor's Children's
Bureau found that nearly 25 percent of them worked 60 hours or
more per week for a median wage of just over $4 a week.
"It is the most far-reaching, the most far-sighted program for the
benefit of workers ever adopted here or in any other country,"
Roosevelt said the night before he signed the bill. "Without question
it starts us toward a better standard of living and increases
purchasing power to buy the products of farm and factory."
Even though the bill didn't cover everyone, the 12 million people
who were making less than 40 cents an hour were grateful. And
it served as the base for future changes in wages, hours, and
child-labor laws.
Forming Neu/ Kinds of Unions
The American Federation of Labor (AFL) was established in the
1880s to serve as an association of autonomous unions, mostly
representing skilled workers such as carpenters and machinists.
The AFL's goals were both mercenary and pragmatic: to get as
much money, job security, and decent working conditions as
possible for its members.
Under the cautious leadership of a former cigar maker named
Samuel Gompers and (after Gompers's death in 1924) a former coal
miner named William Green, the AFL had focused its recruiting and
organizing efforts almost exclusively on skilled workers. Part of the
reason for this focus was discriminatory. Skilled workers tended
to be white and second- or third-generation Americans. Many
unskilled workers were minorities or immigrants.
Chapter 11: Labor Rising: Unions in the Great Depression
What the AFL either failed or refused to recognize, however, was
that as technology changed the workplace, it also changed the
worker..More and more jobs were filled by unskilled men who
ip^lfj\iK^ ^^cific — and often mind-numbingly repetitious —
V(b1»«oiI assembly lines and were as interchangeable to their
employers as the parts they assembled.
The strength of a union in the new workplace was in numbers
of members. But the AFL not only declined to pursue that large
number of unskilled workers, it also insisted on compartmentalizing
its members into small bargaining groups. If it took 19 men doing
different tasks to make a car tire, for example, the AFL wanted 19
unions to represent them.
And despite being the leading labor force at the onset of the Great
Depression, AFL leaders were more diffident and accommodating
than aggressive when it came to making labor's voice heard. One
AFL leader, however, was about to disturb the peace.
Setting up the ClO
The head of the United Mine Workers, John L. Lewis, was big,
bushy-browed, and bombastic. A former miner who had once
managed an opera house, Lewis had a theatrical manner that
either amused or outraged his associates.
Once, when explaining why he seemed always to be in the spotlight,
Lewis said, "He who tooteth not his own horn, the same shall not
be tooted." When asked if he were worried about using known
communists to help recruit union members, Lewis replied
rhetorically, "Who gets the duck, the dog or the hunter?"
Unlike most other union leaders, Lewis saw great value for the labor
movement in organizing unskilled workers. He also argued that it
was better to have a few very large unions than a lot of small ones.
In October 1935, at an AFL convention in Atlantic City, Lewis
became embroiled in a series of confrontations with federation
leaders over the question of organizing unskilled workers. In one
instance, he socked the leader of the carpenters union in the jaw
after the man called Lewis a "bastard." ("Good for you," a disaffected
carpenter telegraphed Lewis. "Now sock him again.")
With a few other union leaders, Lewis ultimately decided to take
on the task of organizing the unskilled. The leaders created the
Committee on Industrial Organization, later renamed the Congress
of Industrial Organizations, or CIO, and divorced themselves from
the AFL. "They have smote me hip and thigh," the colorful Lewis
said of the split, "and right merrily did I return the blows."
/ 8 Part "': Living Through the Great Depression
Fighting in the ranks
DDjjtJ heaijjning, the Congress of Industrial Organizations
My fcefi [t^CT^and the ranks of organized labor. It launched
recruiting drives in industries such as tobacco, textiles, and
laundries whose workforces were dominated by women and
minorities. It established civil rights units within its local unions,
and it even allowed in communists. "So what if he's a Red,"
snapped one union leader of a new member. "He's our Red."
The CIO was also more aggressive than the AFL in its negotiating
tactics. It launched major offensives in the automobile and steel
industries that involved violent confrontations, as I explain in the
next section. And it was more politically active than the AFL,
contributing money and campaign workers to local, state, and
national contests.
vjjjUBEs The competition between the two groups was both good and bad
f°r labor. On the one hand, it helped swell union membership as
V itial ) §rouPs v'ed f°r members. By the end of 1937, the CIO claimed
^55^ 3.7 million members, while the AFL claimed 3.4 million. Combined,
that was more than twice as many unionists as there had been in
1933. On the other hand, the deep rivalry between the two groups
and their leaders (the AFL's Green despised the CIO's Lewis, and
vice versa) prevented labor from speaking with one voice.
The two groups quarreled about the best way to establish federal
minimum wage and workweek laws. Complaining that the National
Labor Relations Board favored the CIO, the AFL worked with
conservative members of Congress to try to weaken the board.
The AFL also accused its rival of being too cozy with communists.
When the country slipped into a new and deep recession in the fall
of 1937, the AFL was better equipped to handle it. Its unions were
older and more established, and its members were better able
and more willing to pay dues because many of them worked in
specialized jobs that paid better wages and were more recession-
proof. By the end of the decade, the AFL had reasserted itself as
labor's dominant organization. But the CIO's existence also forced
the AFL to widen its umbrella and begin admitting unskilled and
semi-skilled workers. In 1955, the AFL and CIO merged into a united
federation.
Chapter 11: Labor Rising: Unions in the Great Depression / S3
Considering the Workers
anted
ne labor group that drew no interest from either the AFL or the
CIO during the Great Depression was the farm workers of the South
and Southwest. They had been specifically excluded from the
protection of federal labor laws governing the minimum wage,
number of hours worked, and union organizing rights.
That lack of federal protection made forming farm worker unions
not only difficult but also dangerous. "Only fanatics are willing to
live in shacks or tents and get their heads broken in the interest of
migratory workers," summed up one labor leader.
Many of the farm workers were Mexicans or first- or second-
generation Mexican Americans. The AFL had spent time and
money trying to have them banned because they allegedly filled
jobs that should have been filled by white Americans.
Still, some unionizing efforts were made, particularly in California,
which was the nation's second-biggest farm state (trailing only
Iowa in the value of its crop production). California farms were
often giant "food factories" owned by companies such as Standard
Oil, Shell Oil, and the Southern Pacific Railroad. There was often a
glut of labor, and it was not unusual for a grower to promise one
wage, only to reduce it when the workers reached the fields or
orchards.
In 1930, communists helped workers form the Agricultural Workers
Industrial League, which struck the fields of California's Imperial
Valley. In 1931, workers walked out of Santa Clara Valley canneries
after pay rates were cut by 20 percent. In 1932, there was a
pea-picker strike. In 1933, it was strawberries; in 1936, lettuce.
In almost every case, tactics that ranged from the use of replacement
workers to shootings and beatings by police or hired thugs
defeated the strikers. Not only did the major labor groups fail to
help, but most state and federal officials were also disinterested.
Not until the 1970s would farm workers succeed in gaining mean-
ingful union representation, and even then they would remain
among the most forgotten of the U.S. economy's forgotten men and
women.
/ 80 Part "': Living Through the Great Depression
Strikes and Fights
DropBoate
federal government lining up solidly behind labor's
ze and workers' rights to decent wages and working
conditions, some big business leaders weren't ready to surrender
their old ways of doing things.
Some companies used spies to pose as workers and promptly
report on any talk of forming a union. The Pinkerton Detective
Agency earned $1.75 million between 1933 and 1936 spying for
automakers. "We must do it to obtain the information we need in
dealing with our employees," Chrysler Corporation Vice President
Herman Weckler told a Senate committee.
When labor trouble appeared imminent, industry could send for
the likes of Pearl Bergoff , a burly New York "consultant" who
would send a small army of heavily armed thugs with names like
"Two Guns" and "Chowderhead" (really!) to act as strikebreakers.
Machine guns, billy clubs, and tear gas were standard equipment
for Bergoff's men. The Ford Motor Company had its own in-house
paramilitary force of 3,000 toughs.
There were other forms of intimidation. Georgia Governor Eugene
Talmadge built concentration camps and had them ready, he said,
for labor pickets. Pennsylvania mine owners had homes of striking
miners bombed. And a textile industry journal editorialized that "a
few hundred funerals will have a quieting effect" on labor unrest.
Shutting dotin cities
All of this anti-union activity was in response to the fact that in
1934, organized labor shook off the torpor with which it had begun
the decade. There were 1,800 strikes during the year, involving 1.5
million people. The smallest strikes involved a handful of workers and
were over in a day or two. The biggest strikes shut down cities,
and often involved violence, as depicted in Figure 11-1.
In Minneapolis, strikes by teamsters in May and July 1934 erupted
into battles that pitted the city's employers and police against
much of its working class. Two strikers were shot and killed, as
were two members of a "citizens' army" organized by employers.
A funeral for one of the striking members drew a crowd of 100,000,
and the strikes shut down most of the city's trucking industry. After
Minnesota Governor Floyd B. Olson declared martial law in late July
and sent in National Guard troops, a settlement was reached, and
the anti-union forces' dominance of the state was broken.
Chapter 11: Labor Rising: Unions in the Great Depression / S7
Figure 11-1: Unionized strikers fight with a group of nonunion replacement
employees as they try to cross the picket line at a factory.
On the West Coast, longshoremen and sailors began an 84-day
strike at every major port on the coast in May 1934. Battles
between strikers and police or private security broke out in the
Los Angeles region's port of San Pedro, where two strikers were
killed, and also in Oakland, Seattle, and Portland.
In San Francisco, two more strikers were killed in early July.
After the deaths, virtually every union member in the city joined a
general strike on July 16. For four days, the city came to a halt.
"No street cars were operating," a journalist reported, "no buses,
taxis, no delivery wagons except milk and bread trucks, which
were operated with the permission of the general strike committee.
No filling stations were open, no theaters, no shops."
Of course, not every newspaper saw it the same way. "The situation
in San Francisco is not correctly described as a 'general strike,'"
sniffed the Los Angeles Times. "What is actually in progress there
is an insurrection, a communist-inspired and -led revolt against
organized government. There is but one thing to be done — put
down the revolt with any force necessary."
/ 88 Part "': Living Through the Great Depression
Whatever it was called, the strike ended after employers agreed to
arbitration, which resulted in the longshoremen being given most
ase they had sought and the right for their union to
bers.
Sitting dotfn on the job
On December 30, 1936, workers at a General Motors auto plant
in Flint, Michigan, shut down the assembly line and sat down.
Over the next few days, workers at 16 other GM plants who were
members of the two-year-old United Auto Workers (UAW) union
followed their lead, and the largest manufacturing company in the
world was brought to its knees. Before the strike began, GM was
making 2,000 cars a day. During the 44-day strike, it averaged 20.
Unlike most strikes, the GM shutdown was as much about the
breakneck pace of the assembly line as it was about wages and
hours. "We don't even have time to go to the toilet," complained
one GM worker. "You have to run to the toilet and run back."
■— ^ oi ine pay mere
DropBotfe
Also unlike most strikes, the GM workers traded the outside
picket lines for the relative comfort of the indoor assembly lines.
The sit-down tactic prevented the company from bringing in
replacement workers, and it made it harder for police and hired
strikebreakers to break heads without risking breaking company
equipment.
That doesn't mean there wasn't violence. When police tried to
prevent food from being delivered to the strikers, a fight broke
out. Using plant fire hoses, the strikers forced the police to retreat.
Michigan Governor Frank Murphy, who had just been elected
with labor's help, decided not to send in the National Guard. And
General Motors, which was losing $1 million a day, gave in.
The UAW, which was affiliated with John L. Lewis's Congress of
Industrial Organizations (CIO), won higher pay, shorter hours, and
a slowed-down production line. Other auto companies eventually
followed, with Ford holding out against unionization longest, until
1941. The UAW's victory helped its membership grow from 88,000
to 400,000 in the first nine months of 1937.
Sit-down strikes became the rage. Unhappy workers adopted the
tactic in department stores, barbershops, hotel kitchens, and
ocean liners. In March 1937, there were 170 sit-down strikes
involving 167,000 workers. Having defeated the auto industry,
meanwhile, the CIO took aim at another big industry: steel.
Chapter 11: Labor Rising: Unions in the Great Depression / $
DropB^te
run steel mills. I
Seating "Biq Steel"
gress of Industrial Organizations (CIO) had won
ts from the coal industry, which supplied the fuel to
. In early 1937, it won the right to organize from the
auto industry, which consumed much of the steel mills' product. So
CIO leader John L. Lewis decided it was time to go after the steel
industry itself, starting with its biggest company, United States
Steel. The company had gross earnings of $35.2 million in 1934
($5.7 billion in 2008 dollars), and yet not a single employee there
was considered a full-time worker. The average steelworker was
making less than $400 per year in 1937.
^JO/toj, "If we can organize here," Lewis said of U.S. Steel, "the rest (of the
industry) will follow. If the crouching lion can be routed, it is a safe
~ i^Z'Tyj bet that the hyenas in the adjacent bush may be scattered along
V^Ty the plains."
But Lewis overestimated the "lion" and underestimated the "hyenas."
In March 1937, Lewis and U.S. Steel board chairman Myron Taylor
stunned the country by announcing agreement on a union contract
that had been negotiated quietly by the two men. Taylor, mindful of
labor's victory over General Motors, agreed to a contract calling for
an eight-hour day and 40-hour week, $5 a day wages, and paid vaca-
tions. No strike had been required, not even the explicit threat of one.
Losing to "Little Steel"
The other steel companies, however, proved to be far less agreeable.
Called "Little Steel" because of their size relative to U.S. Steel, the
firms made it clear they were not in a union mood, particularly if it
meant dealing with Lewis and his CIO.
"I won't have a contract, verbal or written, with an irresponsible,
racketeering, violent communistic body like the CIO," said Thomas
M. Girdler, president of Republic Steel. "And until they pass a law
making me, I am not going to do it."
On May 25, 1937, about 76,000 workers walked out of 27 steel
plants in seven states. The companies retaliated by bringing in
scabs and heavily fortifying the plants with armed guards and
"strikebreakers" who alternately urged the strikers to return to
work and threatened them.
Before the strike was over, 16 striking workers were killed and
hundreds injured. Ten of the deaths occurred on Memorial Day,
when police fired on demonstrators in Chicago, shooting many of
the demonstrators in the back as they fled.
Part III: Living Through the Great Depression
A Senate investigation into the "Memorial Day Massacre" concluded
that "from the evidence we think it plain that the force employed by
the police was far in excess of that which the occasion required. Its
#GSje^frka^6^^cribed to either gross inefficiency in the performance
N^pVlrcJ ckft^or a deliberate attempt to intimidate the strikers."
Intimidated or not, the steel workers lost the battle with Little
Steel. They returned to work in July without contracts. (They did
eventually win the war in 1942 when they signed contracts with all
the Little Steel companies.)
Grouting tired of tabor strife
One of the reasons the Little Steel strike failed was that President
Roosevelt chose not to get involved, despite personal pleas from
John L. Lewis.
"A plague on both your houses," Roosevelt said, echoing a line
from Shakespeare's Romeo and Juliet and signaling that there were
limits on the federal government's role in settling labor disputes.
Roosevelt's stance echoed the feelings of many Americans about
the almost constant unrest stirred up by labor fights in the decade.
There were an estimated 22,000 strikes in the 1930s, involving
millions of workers, thousands of injuries, and scores of deaths.
A 1937 Gallup Poll found that 76 percent of Americans favored the
existence of unions, but almost as many opposed sit-down strikes as
violations of private property rights. (The Supreme Court outlawed
them in 1939.) Most people thought unions should have the right to
organize, but most people also thought industrialists like Henry Ford
should have the right not to let them organize at their companies.
But while the public's ambivalent feelings about labor unions
would continue into the 21st century, labor had not only survived
the nation's hardest economic decade but also made itself a force
in the U.S. economy.
Lessons Learned
Two of the Great Depression's biggest contributions to the U.S.
economic culture were the advent of a federal minimum wage and
the development of organized labor as a significant force in the
financial and political course of the country. Here, I discuss how
a missing element in the 1938 minimum wage law has affected its
course ever since, and how unions' roles have changed significantly
as the economy itself has changed.
Chapter 11: Labor Rising: Unions in the Great Depression / ^ /
Trying to keep pace With
mum rtaqe
air Labor Standards Act was amended 1 1 times from
its adoption in 1938 through 2008, it never included language that
would automatically adjust the federal minimum wage to reflect
increases in the cost of living.
As a result, increases have always been subject to the whims of
Congress and the president, and the wage has been raised only
sporadically. From May 1974 to January 1976, for example, it
increased three times. But from February 1981 to March 1990, and
again from October 1997 to June 2007, it did not increase at all.
Some other facts and figures regarding the federal minimum wage:
Since its inception through 2008, the minimum wage has
never been enough to lift a family of four above the poverty
line if only one member of the family works full-time.
V The $7.25 minimum wage scheduled to go into effect in July
2009 was less than half the January 2009 average hourly wage
of $18.49.
W States can choose to set a minimum wage higher than the
federal level. As of 2009, 27 states had higher rates than the
federal government. In addition, more than 100 U.S. cities had
adopted "living wage" laws that required companies doing
business with the municipal government to pay "living wages"
based on the cost of living in the area.
f As of January 2009, 13 countries had higher minimum wages,
in U.S. dollars, than the United States.
Arguments for and against a minimum wage have changed little
since the Great Depression. Proponents contend that minimum
wage standards reduce poverty and dependence on government
aid, stimulate the economy, and help close the gaps between the
poor and rich. Increases in the minimum wage, they argue, are also
stimulative because they tend to increase other wages.
Opponents insist that raising the minimum wage causes businesses
to hire fewer workers, reduce their current payrolls, and raise prices.
They also argue that most minimum wage earners are youths and
part-time workers whose family incomes are well above the poverty
line, and therefore increases in the wage don't help the poor.
Some studies have concluded that there is no clear correlation
between raising the minimum wage and job loss, or between
raising the minimum wage and reducing overall poverty levels.
Part III: Living Through the Great Depression
Striving, to stay relevant in unions
DropB«s
irked the awkward adolescence of the U.S. labor
: 21st century could be said to be its faltering old age.
A tectonic shift from an industrial production-based economy to
one based on services, retail, and information technology combined
with other factors to steadily reduce the size and influence of
organized labor in the last half of the 20th century.
At its peak in 1945, union membership encompassed 35 percent
of working Americans. In 2008, that number was 12.4 percent. The
public sector far outpaces the private sector in union membership:
While only 7.6 percent of private-sector workers were union
members in 2008, 37 percent of government employees were.
jjABE/? Not all of the decline in union membership can be attributed to
a shifting economy or even "globalization." A study of six other
industrial countries — France, Japan, Italy, the United Kingdom,
Canada, and Germany — found that between 1970 and 1990, union
membership in those countries declined from 37.1 percent to 35.3
percent, while in the United States the decline was from 30 percent
to 17.6 percent.
In 2005, several major unions split from the AFL-CIO (a federation
of unions) to form their own coalition, Change to Win. The unions
took nearly 25 percent of the AFL-CIO's membership with them.
Optimists pointed out that the last time there was a major split
among labor groups was during the Great Depression, when the
Congress of Industrial Organizations (CIO) split from the American
Federation of Labor (AFL). Overall union membership climbed
significantly after the split.
And in 2008, the percentage of U.S. workers in unions made its first
statistically significant increase in 25 years, from 12.1 percent to
12.4 percent.
Part IV
DropBoftflng Thjngs
The 5th Wave
By Rich Tennant
1 By virtue of a single word
* did Eleanor inspive "SDR
to create the ifew Deal.
DropBooks
In this part . . .
JM mericans have rarely elected back-to-back presidents
v \ that were as different in as many ways as Herbert C.
Hoover and Franklin D. Roosevelt. This part looks at the
factors in each man's background that influenced his
leadership style; the decisions each made as president
during this period; and the unsettled transition from one
presidency to the other.
I also cover Roosevelt's New Deal (probably the most
ambitious package of domestic measures in U.S. history)
and discuss whether the measures worked in whittling
down the Great Depression. The part concludes with a
summary of what's been learned — and what is yet to be
learned — from the era.
Chapter 12
Presidents
In This Chapter
Meeting Herbert Hoover
Getting to know Franklin Roosevelt
Changing presidents
Lessons learned
■ ^ne was an orphan who made himself a millionaire and
\r became a world-revered humanitarian. The other was born
rich but had to rebuild his life after being stricken with a crippling
disease. One was a U.S. president who somewhat unfairly has
been demonized as a flop in guiding the country during the
Great Depression. The other was a U.S. president who somewhat
exaggeratedly has been lionized as a savior during the Great
Depression.
This chapter looks at Herbert C. Hoover and Franklin D. Roosevelt,
the two men who served as president during the period from
1929 to 1941, and how they handled the challenges of the darkest
economic time in the country's history. It also covers their campaign
against each other in 1932, and how they handled the transition
from one administration to the other.
"The Great Humanitarian'1
A reporter was said to have asked baseball hero Babe Ruth in 1930
if he thought it was right that at $80,000, Ruth's annual salary was
$5,000 more than President Herbert Hoover's. "Why not?" Ruth
replied, "I had a better year than he did."
This possibly apocryphal story reflects the reputation of Herbert
Clark Hoover, 31st president of the United States, scholar, engineer,
life-saving humanitarian — and scapegoat of the Great Depression.
No U.S. president ever accomplished as much before he was in
the White House — and was so maligned for what he did while in
office.
196 Part IV: Fixing Things
"Once upon a time," Hoover was said to have wryly remarked late
in life, "my political opponents honored me as possessing the
fabulous intellectual and economic power by which I created a
>ression all by myself."
laDulous intelle<
Grouting up
Herbert Hoover — his friends called him "Bert" — was born August
10, 1874, in West Branch, Iowa, making him the first president
whose birthplace was west of the Mississippi River.
He was part of that generation of Americans who bridged the
transition from the country's first century to its second: At the
time of Hoover's birth, the Bronx had just become part of New
York City; a man named Levi Strauss had just received a patent for
"riveted blue jeans"; and Billy the Kid, at 15, was still just a kid.
By the time Hoover was 8 years old, both of his parents had died,
and he grew up under the care of an aunt and uncle in Newburg,
Oregon. He attended a Quaker secondary school his uncle had
helped found, and then he went to a night school where he studied
algebra and geometry and developed a love for engineering.
In 1891, despite not having graduated from high school, Hoover
was accepted as an engineering student in the first class of a new
university in northern California called Stanford. He managed the
baseball and football teams, and he met and eventually married
another student named Lou Henry, who was the daughter of an
Iowa banker. When he graduated in 1895, the 21-year-old Hoover
had a degree in geology, $40 in his pocket, and no firm prospects.
Striking qold
Hoover landed a job as a clerk with a San Francisco mining firm,
working his way up to become an engineering assistant. In 1897,
at the age of 23, Hoover was hired by a British company and sent
to Australia to supervise the firm's gold mining operations. By
the time he left in 1899 for a new assignment as the chief mining
engineer of the Chinese government, Hoover was making $10,000
a year from the mines and was on his way to amassing a fortune of
more than $4 million ($85 million in 2008 dollars).
While in China, Hoover helped organize the successful defense
of the offices and homes of Western diplomats when a group of
anti-Western Chinese attacked them in what was known as the
"Boxer Rebellion." In November 1901, Hoover moved to London to
become a partner in the mining firm that had hired him four years
before.
Chapter 12: A Tale of Two Presidents / "J
With London as a base, Hoover traveled to every continent except
Antarctica over the next 12 years to oversee various mining projects.
But in ipi4, the outbreak of World War I effectively ended his life in
(^^r volunteered to help more than 100,000 Americans,
itwepe when the war began, get home.
"I did not know it," he wrote later, "(but) my engineering career
was over forever. I was on the slippery road of public life."
SaVinq tides
When the evacuation of his fellow Americans was finished,
Hoover became chairman of the Commission for Relief in Belgium.
The group used private donations to funnel food and supplies to
German-occupied Belgium. Hoover worked day and night,
shuttling across the North Sea between Berlin and London to
convince the Germans to allow the supplies into Belgium and
overseeing distribution.
When the United States entered the war in April 1917, President
Woodrow Wilson appointed Hoover as head of the American Food
Administration, responsible for stabilizing domestic food prices,
ensuring food got where it was needed, and convincing Americans
to cut food consumption (which he did without having to resort to
rationing).
After the war, Hoover became chairman of the Allied Food Council
and the American Relief Administration. The groups managed food
supplies to war-torn countries, including those of defeated enemies.
When a British admiral said to Hoover, "young man, I don't see
why you American chaps want to feed those bloody Germans,"
Hoover snapped back, "old man, we can't understand why you
British want to starve women and children after they are licked."
Hoover's efforts were warmly applauded at home and in other
countries. He became known as "the Great Humanitarian," and The
New York Times named him one of the "ten most important living
Americans."
"He is certainly a wonder," said the Assistant Secretary of the
Navy, who was an admirer of Hoover, in 1920, "and I wish we could
make him president of the United States. There could not be a
better one." The admirer's name was Franklin D. Roosevelt.
198 Part IV: Fixing Things
Serving presidents
DropBWte
California Repu
as Hoover in 1920 that both major political parties
:«*t4Jiy^*6 a possible presidential candidate. He entered the
alifornia Republican primary election but finished second and
then threw his support behind the eventual GOP nominee, Ohio
Senator Warren G. Harding.
After Harding's election, Hoover was appointed Secretary of
Commerce. With an engineer's penchant for organization, Hoover
used the office to increase efficiency by imposing national size and
dimension standards for everything from bed mattresses to bricks
to bolts. He pushed for better job safety regulations, promoted
international trade, and was a cheerleader for home ownership.
Hoover used his humanitarian skills again by overseeing vitally
needed aid to famine-stricken Russia in 1921 and running relief aid
to six Southern states in 1927 after huge Mississippi River floods.
In 1923, Harding died and was succeeded as president by Calvin
Coolidge. Coolidge did not hide the fact he didn't like Hoover,
sarcastically referring to him as "Wonder Boy" and once remarking of
Hoover: "that man has offered me unsolicited advice for six years,
all of it bad."
Nonetheless, Coolidge retained Hoover as Commerce secretary,
in part because of Hoover's widespread popularity. And when
Coolidge decided not to run for a second full term as president
in 1928, he voiced no public objection to Hoover becoming the
Republican candidate.
Serving as president
Hoover easily defeated his Democratic rival, New York Governor
Al Smith, in the 1928 presidential race. He assumed the presidency
brimming with confidence. "I have no fears for the future of our
country," he said at his inauguration. "It is bright with hope."
As president, Hoover had ambitious plans for a progressive,
reform-minded program that would make up for the failure of the
Harding and Coolidge administrations to do much of anything
beyond protect the interests of the business community. He
expanded the civil service system, canceled private oil leases on
public lands, organized the federal prison system, and planned or
launched reforms in social service areas such as slum clearance.
But scarcely eight months into his presidency, the U.S. stock market
crashed, presaging the economic disaster that became the Great
Chapter 12: A Tale of Two Presidents / tyty
Depression. The rest of Hoover's term was completely dominated by
trying to fix the financial mess the country found itself in.
ed territory for a U.S. president. The federal
role in shepherding the national economy had
historically been minimal, so Hoover had no blueprints from which
to come up with a plan that might work. He did, however, try.
His attempts included subsidizing agriculture; cutting taxes;
increasing taxes; financing public works; making government
loans to railroads, banks, and other financial institutions; liberalizing
bank credit; and providing federal aid to stave off mortgage
foreclosures. He ran up large federal budget deficits in funding
some of the efforts to right the economy.
Hoover's efforts won some applause. BusinessWeek called his plan
to shore up sagging banks "the most powerful offensive force that
government imagination has, so far, been able to command." The
New York Times went further: "The president's course in this
troublous time has been all that could be desired. No one in his
place could have done more; very few of his predecessors could
have done as much."
A qood man, a bad politician
But Hoover's efforts were hampered by several factors. One was
that it was hard for him to be enthusiastic about governmental
actions to which he was philosophically opposed. Hoover believed
that government's role in economic matters should be minimal
and that direct relief in the form of unemployment aid, old age
pensions, or other subsidies to individuals was not the job of the
federal government. (See Chapter 5 for more on Hoover's views
about direct federal relief to the unemployed and hungry.)
Hoover also suffered from the fact that while he was a very good
manager, he was a lousy and inexperienced politician. In fact, the
presidency was his first elective office. "Being a politician is a poor
profession," he would later write. "Being a public servant is a noble
one." That sentiment ignored the fact that the presidency was a
political office and sometimes required political skills to build
consensus, make compromises, and get things done.
Finally, Hoover lacked the personality to inspire public confidence
at a time when the public's confidence was badly shaken. He was
somewhat shy and not a good public speaker. When he did talk, he
sometimes would say patently absurd things, such as suggesting
that "many persons (had) left their jobs for the more profitable
one of selling apples" on street corners.
200 Part IV: Fixing Things
"Hooverisms"
ian is in trouble iswhen he becomes the butt of humor, and
in ine ureai Depression, Herbert Hoover's surname was the butt of a lot of bitter
sarcasm. The slums of shacks and sheds thrown up by homeless people became
known as "Hoovervilles." Broken-down cars pulled by mules were "Hoover Carts."
Newspapers used as coverings were "Hoover blankets"; empty pockets turned
inside out were "Hoover flags"; and jack rabbits were "Hoover hogs."
The crowning indignity for Hoover came after he left office. A giant dam on the lower
Colorado River that had been named for him was ordered renamed Boulder Dam by
the Roosevelt administration in 1933. But Hoover got the last laugh on this one: In
1947, after Roosevelt's death. Congress renamed the structure Hoover Dam.
Because Hoover wasn't widely trusted, for example, people continued
to withdraw their money from banks and stuff it under their mat-
tresses even after Hoover took steps to prop up the financial industry.
Hoover was also seen as elitist and aloof. He dressed formally for
dinner every evening; smoked 20 expensive Havana cigars a day;
and declined to visit soup kitchens, bread lines, or any other place
the poor and needy gathered.
His national image as a Scrooge in the White House was cemented
by the Bonus Army disaster in the summer of 1932 (see Chapter 4
for details). Many Americans were horrified and angered by press
accounts and newsreel film of U.S. troops using tanks and bayonets
against military veterans who had been seeking early payments
of promised service bonuses. The troops' commander, General
Douglas MacArthur, had disobeyed Hoover's specific directions
and ordered the attack. Nonetheless, Hoover, who had refused to
meet with the veterans, was blamed.
Hoover had become so unpopular that an oft-repeated joke at the
time had the president asking an aide if he could borrow a nickel so
he could call a friend. "Here's a dime," the aide replied, "call both of
them." By the time the 1932 presidential election campaign began to
pick up speed, Hoover was, politically speaking, a dead duck.
The Aleut Dealer
He could not stand unaided, but Americans accorded him the
longest tenure in office of any U.S. president. He was born to wealth
and privilege yet was regarded by the down-and-out as a friend to
the "forgotten man" and by the rich as "a traitor to his class."
Chapter 12: A Tale of Two Presidents 201
r-N i-^ sugges'
DropBa®
He was so self-confident that an observer joked "he must have
been psychoanalyzed by God." He was so optimistic that an aide
suggested "he was all light and no darkness." He was Franklin
elt, the 32nd president of the United States and the
ited with leading the country out of the grip of the
Great Depression.
Grouting up
Franklin Roosevelt was born January 30, 1882, in Hyde Park, New
York. His parents were both from wealthy and established families.
Roosevelt's ancestors and relatives included passengers on the
Mayflower and an opium dealer. He was also related by blood
or marriage to 11 U.S. presidents. One of them, his fifth cousin
Theodore, became Franklin's political idol.
Roosevelt was educated at a prestigious private boarding school
and then graduated from Harvard in only three years. After only
a year of classes at Columbia University's law school, Roosevelt
passed the New York State Bar exam and took a job with a
prestigious Wall Street law firm.
He also married a distant cousin, Eleanor, and had six children.
(The marriage was a painful one for Eleanor. Franklin had an affair
with her social secretary, broke it off, and then resumed the
affair after being elected president. But Eleanor would throw
herself into the role of First Lady with zeal and serve as a valuable
asset to her husband and the country.)
Starting his political career
After a few years practicing law, Roosevelt grew restless. In 1910,
he began his political career by running as a Democrat for a state
Senate seat that had been held by Republicans for 26 years. His
family name and a generally good year for Democrats carried him
to victory, and he won reelection in 1912.
As a reward for working for the election of Woodrow Wilson to
the presidency in 1912, Roosevelt was named Assistant Secretary
of the Navy. He held the post until 1920, all the while building his
standing within the Democratic Party and his popularity nationally.
In 1920, Roosevelt was picked as the vice presidential running mate
for Democratic presidential nominee James Cox, the governor of
Ohio. But the ticket was thrashed by the Republican pair of Warren
Harding and Calvin Coolidge, and Roosevelt returned to practicing
law and readying himself for another political campaign.
202 Part IV: Fixin9 Things
Losing the use of his tegs
P"\ \ 1^ ^VV^Pl^?^' ^ooseve"; was vacationing at the family's 34-room
j Ij 11 1 J C^1t3f^\<F5lge'' on Campobello Island in the Canadian province
oTNew Brunswick. After a swim, he began running a high fever and
developed a weakness in his legs that eventually turned to paralysis.
His illness was publicly downplayed by the family and reported
in the newspapers as everything from a heavy cold to an attack of
rheumatism. However it was diagnosed in the press, Roosevelt was
consistently reported to be recovering.
But he wasn't. At the age of 39, Roosevelt had been stricken with
what was diagnosed at the time as polio, often referred to as
"infantile paralysis" because it tended to afflict children more than
adults. (In 2003, researchers reported that FDR's disease may have
been Guillain-Barre Syndrome.)
Despite grueling and painful efforts, Roosevelt would never again
take more than a few halting steps, and then only with the use of
heavy leg braces. But in the years leading up to his presidency,
FDR would publicly insist that his condition was improving. He
never allowed himself to be photographed in his wheelchair or
being carried, and he usually gave speeches or made other public
appearances standing upright, supported on one side by someone.
Becoming governor
Throughout the rest of the 1920s, Roosevelt kept up his political
contacts within the Democratic Party. In 1922, he helped former
New York Governor AI Smith win the governorship back. In
1924, Roosevelt made a mesmerizing appearance at the party's
presidential nominating convention, giving the nomination speech
for Smith, who did not win the nomination.
In 1928, Roosevelt again gave the nomination speech for Smith at
the Democratic National Convention. This time, Smith got the party's
nod. Roosevelt, who feared 1928 would be a Republican year,
did not want to run for anything. But Smith, who wanted FDR's
presence on the ticket to help him carry New York, convinced
Roosevelt to run for governor. Herbert Hoover slaughtered Smith
in the presidential contest, even carrying New York, but Roosevelt
won a close race for governor.
As governor, Roosevelt aggressively pushed a program of social
services. He won legislative approval of a tax break for agricultural
communities in tough economic straits. He also lobbied for old-age
pensions funded by workers, employers, and government. "The
Chapter 12: A Tale of Two Presidents 203
first duty of a State, and by that I mean government, is to promote
the welfare of the citizens of that state," Roosevelt declared.
DropBegoks
asily winning reelection, Roosevelt called the
'o special session and pushed through a $20 million
unemployment relief plan, the first such program by any state.
With the nation's economy going into a tailspin and Democrats
growing hopeful of winning the White House for the first time since
1916, Roosevelt's name was increasingly mentioned as a candidate.
The mentions, however, were not always flattering. The influential
newspaper columnist Walter Lippmann wrote that Roosevelt was
"a pleasant man who, without any important qualifications for the
office, would very much like to be president."
Running for president
Although Roosevelt had been considered the favorite in many
quarters to win the Democratic nomination in 1932, he was not
universally acclaimed, in part because people were uncertain
whether he was politically conservative or liberal.
"In Franklin Roosevelt we have another Hoover," said the
Scripps-Howard newspaper chain. The New Republic magazine
called him "not a man of great intellectual force or supreme moral
stamina." The Nation magazine suggested there was "no evidence
whatever that people are turning to him as a leader."
Roosevelt's leading opponent was Al Smith, his former political
mentor-turned-bitter rival. Smith won the Massachusetts primary,
while Representative John Nance Garner of Texas, who was Speaker
of the House of Representatives, won the California primary.
When the Democrats met in their national convention in Chicago,
Roosevelt found that he could win the nomination only through
some wheeling and dealing. After three ballots and no nominee,
FDR offered the vice presidency to Garner. Garner, known as
"Cactus Jack," accepted the offer. California switched its support
to Roosevelt, and he clinched the nomination.
Roosevelt then did something unprecedented in U.S. political
history. Flying for nine hours through dangerous headwinds from
New York to Chicago, Roosevelt showed up at the convention to
accept the nomination in person, starting a practice that was
followed in future years by other nominees. After his campaign
theme song, "Happy Days Are Here Again," was done blaring,
Roosevelt delivered a crowd-pleasing 4,373-word speech. But it
was 14 words in the 63rd paragraph that would resonate through
the rest of the 20th century:
20 1} Part IV: Fixin9 Things
^/f™^\ "I pledge you, I pledge myself, to a new deal for the American
~ ( VjSZ^pj people."
aiqn, Hard Transition
The morning after Roosevelt's speech accepting the Democratic
presidential nomination, the phrase "New Deal" dominated
newspaper headlines across the country.
Neither FDR nor his speechwriter, Sam Rosenman, had any idea
that the phrase would catch on as much as it did. It may have been
borrowed from a new book called The New Deal by economics writer
Stuart Chase or from a New Republic magazine story by Chase
entitled "A New Deal for America."
Wherever it came from, the phrase stuck. An editorial cartoon in
the New York World-Telegram the day after Roosevelt's speech
captured the phrase's appeal. It depicted a farmer looking up at a
passing airplane, which on its wings bore the words NEW DEAL.
Running to the right
The conservative elements of the Democratic Party weren't
quite sure what they had as a candidate. In a speech at Georgia's
Oglethorpe University in May 1932, for example, Roosevelt had
implied no proposal was too far out to try if it had promise.
"The country needs and, unless 1 mistake its temper, the country
demands bold persistent experimentation," Roosevelt said. "It
is common sense to take a method and try it; if it fails, admit it
frankly and try another. But above all, try something."
That kind of talk struck some party leaders as being too liberal and
capable of scaring off voters who were fearful of "radical" ideas.
"Tell the governor that he is the boss and we will follow him to hell
if we have to," Roosevelt's running mate, John Nance Garner, told
a messenger. "But if he goes too far with some of these wild-eyed
ideas, we are going to get the shit kicked out of us."
Garner and other doubters, however, underestimated Roosevelt's
political skills and his pragmatism. "To accomplish anything
worthwhile," he said, "there must be a compromise between the
ideal and the practical."
Chapter 12: A Tale of Two Presidents 205
In fact, Roosevelt publicly embraced what was a fairly conservative
Democratic Party platform. It called for things like a 25 percent cut
in federal spending and keeping the country on the gold standard,
/7fcM?n\vlrfil^end to dry up the money supply and make things
VwrSel InVkPpoor while protecting the interests of the wealthy.
On the campaign trail, Roosevelt attacked Hoover for "reckless and
extravagant spending" and running up federal budget deficits. He
also criticized the incumbent for being "committed to the idea that
we ought to center control of everything in Washington as rapidly
as possible." (Within a year, that statement would ooze irony, as
Roosevelt would expand the federal government's role into nearly
every aspect of American life.)
Campaigning for a tost cause
In the end, it probably wouldn't have mattered if Roosevelt had
worn his underwear on his head and delivered speeches in Urdu.
There was virtually no chance voters were going to reelect Hoover,
and Hoover knew it. In contrast to the ever-smiling Roosevelt,
Hoover's public persona during the campaign ranged from somber
to dour. His message seemed to give voters a choice between
FDR's "new deal" and his own "same old stuff."
"My countrymen," he said in one speech, "The fundamental issue
that will fix the national direction for one hundred years to come
is whether we shall be in fidelity to American tradition, or whether
we shall turn to innovations."
Hoover didn't begin active campaigning until the month before the
election, and it went badly. People threw eggs and tomatoes at his
campaign train. He was booed during speeches and greeted with
signs that read "Down with Hoover" and shouts of "Hang Hoover."
Some Republican candidates for other offices stayed as far away
from the Hoover campaign as they could. The crowning indignity
may have come in the form of an anonymous telegram to Hoover
that said: "Vote for Roosevelt. Make it unanimous."
Winning the White House
As expected, Roosevelt won by a crushing margin. The popular vote
was 57.2 percent for FDR and 40 percent for Hoover. Roosevelt
received 472 electoral votes, Hoover just 59. In terms of the
popular vote, it was the worst defeat ever handed an incumbent
president.
Part IV: Fixing Things
That the country had been ready for a change in the White House
was obvious. Just what it had changed to, however, was a different
story. Newspaper editor William Allen White wrote to a relative
~ !jpL^lQhat he hoped FDR "may develop his stubbornness
B Jrag^^iis amiability into wisdom, his sense of superiority
into statesmanship. Responsibility is a winepress that drags forth
strange juices out of men."
Roosevelt himself had some doubts. On the night of the election,
he told his son James, "you know Jimmy, all my life I've been afraid
of only one thing — fire. Tonight I think I'm afraid of something
else . . . I'm just afraid I may not have the strength to do the job . . .
pray for me, Jimmy."
Handing off the Great depression
There was a 1 16-day gap between the November 8, 1932, election
and the March 4, 1933, inauguration ceremony, which left Hoover
in charge as a lame-duck president. Scarcely a week after the
election, he sent a telegram to Roosevelt, asking to meet. Hoover
wanted to talk about canceling or modifying European countries'
World War I debts to the United States, which was a highly
unpopular idea with the American public.
Hoover's motive may have been statesmanlike, but it also may
have been politically nefarious: The more the two men were seen
to be working together, the less Hoover might be blamed for what
was happening. Roosevelt did meet with Hoover at the White
House on November 22, 1932, and again in January 1933. But FDR
was wary and refused to commit to anything until he was fully in
charge.
A frustrated Hoover later said he found Roosevelt "amiable,
pleasant, anxious to be of service, very badly informed and of
comparatively little vision." He also referred to him as "a very
ignorant . . . well-meaning young man," although Roosevelt was
only seven years younger than Hoover.
Hoover tried once more to reach some agreement with Roosevelt.
In mid-February, he sent FDR a ten-page letter (in which he
misspelled Roosevelt's last name) warning him that the country's
banking system was on the verge of collapse and asking Roosevelt
to make a public statement on what he intended to do. This time,
Roosevelt, who was well aware of the banking crisis and had his
advisors working on a response to it after he was sworn in, ignored
Hoover's letter. He later said a secretary had lost it.
Chapter 12: A Tale of Two Presidents 207
^ ^ would part ene
DropBoms
The two men met once more on the night before the inauguration,
and they rode to the ceremony together (see Figure 12-1), but they
would pjart enemies. Hoover lived for 32 years after leaving office,
t the age of 90. Asked during his retirement how he
'ritics of his role in the Great Depression, he joked, "1
outlived the bastards."
Figure 12-1: President Herbert Hoover and President-elect Franklin Roosevelt
ride to Roosevelt's inauguration, March 4, 1933.
Avoiding an assassin's buttet
In part to relax and in part to dodge Hoover, Roosevelt took a 12-day
cruise in early February 1933 on a yacht belonging to businessman
Vincent Astor. On February 15, Roosevelt gave an impromptu
speech at a bayside park in Miami from the back seat of an open
car. Just after he finished, a crazed 32-year-old unemployed Italian
immigrant named Giuseppe Zangara began firing at FDR.
Roosevelt was unscathed, but five other people were hit, including
Chicago Mayor Anton Cermak, who had been standing on the car's
running board while talking to Roosevelt. The president-elect
ordered Secret Service agents to put Cermak in the car and rush
to the hospital. Roosevelt cradled the mayor, according to an aide,
and told him, "Tony, keep quiet — don't move. It won't hurt if you
keep quiet." Roosevelt was apparently unshaken during and after
the event. "He had no nerves at all," marveled one of his advisors.
208 Part IV: Fixing Things
— N March 20 in Fl<
DropBooks
Taking otfer
Cermak died on March 6, two days after Roosevelt's inauguration.
Zangara, who pleaded guilty to the shootings, was executed on
Florida's electric chair.
While presidents traditionally drew much of their counsel from
other politicians or captains of industry, Roosevelt turned to
academia. His circle of advisors, tagged with the nickname "Brain
Trust," included Raymond Moley, a professor of government
at Columbia University in New York; Rexford Guy Tugwell, a
Columbia University economist; and Adolf Berle, Jr., a Columbia
Law School professor.
Behind the scenes, Roosevelt's advisors and other aides were work-
ing on plans to save the country's crumbling banking system. (For
more details on FDR's efforts to save the banks, see Chapter 4.)
Moley and William Woodin, who would become Roosevelt's first
Treasury secretary, met with members of Hoover's Treasury staff
to work out details.
Roosevelt, meanwhile, was being told by some people that, if
necessary, he should seize more power than the presidency had —
just as the German chancellor, Adolf Hitler, was doing at the time.
"Even the hand of a national dictator is preferable to a paralyzed
state," said Kansas Governor Alf Landon.
In his inaugural speech, Roosevelt did say that to get things
moving, he would seek from Congress "broad executive power
to wage war against the emergency as great as the power that
would be given to me if we were in fact invaded by a foreign
foe." Borrowing a line from the 19th-century American writer
Henry David Thoreau ("nothing is so much to be feared as fear"),
Roosevelt also assured the crowd and the millions listening on
radio that it was his "firm belief that the only thing we have to fear
is fear itself."
Like the "new deal" phrase in his nomination acceptance speech,
the "fear itself" line struck a chord with Americans. But as humorist
Will Rogers pointed out, Americans were ready to embrace just
about anything the new president did or said.
"If he (Roosevelt) burned down the Capitol," Rogers observed, "we
would cheer and say 'well, at least he got a fire started somehow.'"
Chapter 12: A Tale of Two Presidents 200
Lessons Learned
ns change presidents, the change is often accompanied
ls\l£Jmpatience: Why does it take so long for the old
administration to get out of the way of the new one?
Here's a look at how the transition, which used to take even longer,
was changed during the Great Depression, followed by a look at
how Presidents George W. Bush and Barack Obama handled the
hand-off of power during the country's deepest recession since the
1930s.
Changing the Wait With the
Twentieth Amendment
Under the original provisions of the U.S. Constitution, a newly
elected president took office on the March 4 following the
November general election. The Congress that was elected in
November waited even longer — 13 months — before taking office.
That meant a new congressman elected in, say, November 1884
would not take office until December 1885. It also created the
situation where defeated congressmen would remain in office for
months, exposing them to the temptation of doing anything they
wanted without having to fear voter retribution.
The long wait was considered necessary because counting votes
in the late 18th century could take a long time, and a newly elected
president would also need time to get his affairs in order and
travel all the way to the capital. He could then call the Senate into
a brief special session to confirm his cabinet appointees and spend
the rest of the year pulling together his administration before the
Congress convened in December.
<£to Hfyf But the advent of trains and telegraphs, and later airplanes and
*>/f^l^\ telephones, made the original system hopelessly obsolete. So in
- 1932, Congress approved the Twentieth Amendment to the U.S.
Vj^v^ Constitution. The amendment moved the presidential inauguration
from March 4 to January 20 and the start of the new Congress to
the January 3 after the November election.
But it took until January 23, 1933, for three-fourths of the country's
48 states to ratify the amendment — three days too late to affect
the 1932 election. That meant Franklin Roosevelt did not take over
from Herbert Hoover until March 4.
/ 0 Part 'V: Fixing Things
Handinq off the office from
Obama
ere were many similarities between the transition from
President George W. Bush to President Barack Obama following the
2008 presidential election and the handoff from Herbert Hoover to
Franklin Roosevelt following the 1932 election.
Both occurred in the midst of severe economic crises. In both
cases, the banking industry was in shambles, unemployment was
climbing, people were losing their homes to mortgage foreclosures,
and a popular Democrat was taking over for an unpopular
Republican.
But there was also a key difference. In 1932, Roosevelt had badly
beaten Hoover after a campaign in which Hoover referred to
Roosevelt as a "chameleon on plaid" and Roosevelt had called
Hoover "a fat, timid capon." These guys really didn't like each
other.
In contrast, Obama, whose opponent was Senator John McCain
of Arizona, criticized the termed-out Bush's policies during the
campaign but not Bush personally. Bush likewise refrained from
personal attacks on Obama.
The result was one of the smoother presidential transitions in
modern U.S. history. Obama made it plain that Bush was president
until January 20, 2009, and he would not presume to tell him what
he should do. In return, Bush graciously conferred with Obama on
key issues during the transition.
It was certainly better than when Bush took over from President
Bill Clinton in 2001: Incoming Bush aides found that the "W" keys
had been removed from many of the keyboards in the Executive
Office Building.
Chapter 13
New Deal
In This Chapter
Sprinting out of the gate: FDR's first 100 days
Digging deeper: The second New Deal
Trying to pack the Supreme Court
Considering the New Deal's impact
Lessons learned
1
m t started at the governmental equivalent of light-speed and
«C ended with a world war. In between was the creation of an
abundance of government programs, a fierce fight with the
Supreme Court, and new and promising efforts to combat the Great
Depression rising from old and failed ones.
Put it all together, as this chapter does, and you had the New Deal:
President Franklin D. Roosevelt's attempt to solve an economic
dilemma bigger than any the United States had ever seen.
In addition to looking at both phases of the New Deal, this chapter
examines FDR's quarrel with an uncooperative Supreme Court
and assesses the immediate effects the administration's programs
had on the Great Depression, as well as their lasting impact on the
country.
Starting Fast: The First WO Days
On the morning after he was sworn in as president, Roosevelt had
himself wheeled into the Oval Office, only to find that there were
no pencils or paper in the desk and no buzzer to summon aides.
Roosevelt took a deep breath and began bellowing for a secretary.
Then he got to work on what would be forever known as the New
Deal.
/ 2 Part 'V: Fixing Things
^ ^ so federal regu
DropBatfe
The first order of business was assessing just how big a mess the
nation's banking system was in. Roosevelt ordered all banks closed
so federal regulators could see which ones were sound enough to
eopen. Within a week, FDR had pushed an emergency
ri*iflg1bttW?rough Congress. (For details on the banking crisis
and Roosevelt's response to it, see Chapter 4.)
The swiftness of Roosevelt's action on the banking crisis
impressed even those who had been less than impressed by him
as a candidate. The influential columnist Walter Lippman, who
had criticized FDR in 1932 for lacking leadership qualities, wrote
in March 1933 that "in one week, the nation, which had lost
confidence in everything and everybody, regained confidence in
the government and in itself."
The new president was just getting warmed up. In the first 100
days after taking office, the Roosevelt administration and Congress
crafted more than a dozen major pieces of legislation, all of them
designed to shore up, patch, revive, or jumpstart some aspect of
the national economy. Some historians have labeled the period the
busiest three months in congressional history.
"The special session of the 73rd Congress has hung up an amazing
record of achievement in its 14-week setting," said Time magazine
in June 1933. "It was President Roosevelt's do-or-die attack against
the Depression."
It often was not the most organized of attacks. One of FDR's top
aides, Raymond Moley, once joked that saying Roosevelt's New Deal
was planned was like saying a boy's room strewn with chemistry
sets and dirty clothes was the work of an interior decorator.
In one instance, Harry Hopkins, FDR's top aide, and Frances
Perkins, Roosevelt's Secretary of Labor, huddled under the stairs
of a women's club in New York City to draft plans for an emergency
relief program. In another case, Hopkins suggested during lunch
with Roosevelt that the country needed a public works program
to provide temporary employment. Within a week, the plan was
up and running under Hopkins's charge, and within a month it had
created jobs for 2.6 million people.
When a program didn't work — and plenty of them didn't — the
president and his people plucked out its best elements, melded
them into a new program, and forged ahead.
Chapter 13: Roosevelt's New Deal 2
Harold I
DropBed
In addition, Roosevelt sometimes shot from the hip when it came
to picking advisors. For example, his Secretary of the Interior,
Harold ickes, was FDR's third choice for the job, behind two U.S.
urned him down. Ickes was a Republican, as were
sevelt's advisors, and had never met the president
when he was appointed Interior secretary. Ickes would become
one of FDR's most important aides and serve him in various
capacities for 13 years.
"Roosevelt is an explorer who has embarked on a voyage as
uncertain as that of Columbus," said the British statesman Winston
Churchill, "and upon a quest which might conceivably be as
important as the discovery of the New World."
An alphabet soup of achievements
Many men in Congress shared Roosevelt's thirst for swift action.
More than half of the two houses' 531 members had first been
elected in 1930 or 1932; they were sent to Washington with voter
expectations that they would do something to knock down the
Great Depression. Other congressional members were dazzled by
FDR's jaunty confidence or impressed by his enormous popularity.
Whatever the reason, most of them voted the way the president
wanted, most of the time.
Here's a look at some of the programs that emerged from what
became known as The Hundred Days.
The Emergency Banking Act
After 35 minutes of debate, Congress passed a measure that gave
Roosevelt broad authority over U.S. currency and credit and
approved the printing of $2 billion to pump up banks' assets. See
Chapter 4 for more on the measure.
The Economy Act
A master politician, Roosevelt loved to "zig" just when his opponents
expected to him to "zag." So while many conservatives expected
him to run up the federal government's debts for a sheaf of social
programs, Roosevelt instead pushed for saving $500 million by
cutting pensions to military veterans and reducing salaries for
federal workers — including members of Congress. "For three long
years," FDR scolded, "the federal government has been on the road
to bankruptcy."
21 £} Part IV: Fixin9 Things
The bill passed over the protests of many Democrats in Congress
but with support from many Republicans.
'onsert/ation Corps (CCC)
i alTttie New Deal's projects and programs, this was the one
closest to Roosevelt's heart. It established a system of camps for
young men who worked in conservation programs throughout the
country's national parks and wild lands. For more details on the
CCC, see Chapter 8.
The Federal Emergency Relief Act (FERA)
One of the most pressing problems faced by the Roosevelt
administration was helping Americans who literally were on the
edge of starvation. In May 1933, Congress passed a bill creating the
Federal Emergency Relief Administration, and Roosevelt put his
top aide, Harry Hopkins, in charge. The program started with $500
million, half of which was passed out to states on a matching basis:
one federal dollar for every three state dollars. The other half was
designated to go where it was most immediately needed or where
the matching fund requirement could not be met.
Even before he had a desk in his office, Hopkins had approved $5
million in grants to six states. He and his small staff alternately
coaxed, cajoled, coerced, and threatened local agencies to funnel
the funds to the needy as fast as possible. Before the program
was absorbed into another New Deal program in 1935, FERA
handed out $3 billion (about $48.2 billion in 2008 dollars) to needy
Americans.
The Agricultural Adjustment Act (AAA)
At the same time that FERA was being launched, Congress
approved a bold program designed to prop up the prices that
farmers could get for their crops and livestock by paying them not
to plant or raise so much. Take a look at Chapter 6 for more details
on the AAA.
The Emergency Farm Mortgage Act
and Home Owners' Loan Act
Both measures were designed to provide funds and lending
mechanisms that could help people stave off mortgage foreclosures
and, in some cases, reverse foreclosures that had already
occurred. By 1935, one-fifth of all farm mortgages had been
refinanced. The homeowners' program provided loans of up to
$14,000 at 5 percent interest. By 1936, the program had made
1 million loans totaling $3 billion.
Chapter 13: Roosevelt's New Deal 215
In 1934, well after the end of The Hundred Days, Congress
approved the National Housing Act. The act created the Federal
— ^ — ^ Housina Administration, which insured home mortgages and set
| \ 1T\ fi\ <al|<L/il^teindards for construction quality and home loans,
I >/ k-/ I— ' S«rc%«s6l\l!«f cent down payments for a 20-year mortgage.
The Tennessee Vaileu Authority (TV A)
The TVA was notable among New Deal programs in that it was
designed to make people's lives better in the future — not just to
meet an immediate need.
After the United States entered World War I in 1917, the federal
government built a dam on the Tennessee River at Muscle Shoals,
Alabama. The dam's purpose was to provide cheap hydroelectric
power for a plant to manufacture munitions.
But the war ended before the plant was built, and for the next 16
years Congress debated what to do with the dam. Some wanted
to sell the project to private interests. Others — most particularly
Senator George Norris of Nebraska — crusaded for federal
development of the area. With the election of Roosevelt, Norris
at last had the powerful ally he needed to realize his quest.
As approved by Congress, the TVA was a seven-state (Tennessee,
Kentucky, Virginia, North Carolina, Georgia, Alabama, and
Mississippi) organization charged with producing low-cost electricity,
developing local manufacturing, enhancing the navigability of the
river, providing flood protection, and "improving the economic
and social well-being of the people living in said river basin."
By 1940, 21 TVA hydroelectric plants had been completed, providing
electric power to tens of thousands of poor rural families who had
never had electricity. Many of the project's other goals, such as
flood protection, were also reached.
"Ten thousand men are at work, building with timber and steel
and concrete the New Deal's most magnificent project, creating an
empire with potentialities so tremendous and so dazzling that they
make one gasp," federal investigator Lorena Hickok wrote in June
1934. "There's a chance to create a new kind of industrial life, with
decent wages, decent housing. Gosh, what possibilities! You can't
feel very sorry for Tennessee when you see that in the offing."
Truth in Securities Act and Securities Exchange Act
Not long after the stock market crashed in late 1929, the Senate
Banking Committee began looking into just what had happened.
Senators listened to tale after tale of legally dubious and morally
reprehensible practices by more than a few bankers and brokers.
1() Part IV: Fixing Things
In May 1933, Congress approved the Truth in Securities Act: a
measure that required every new stock issuance to be registered
with tha Federal Trade Commission and fully disclosed in detail.
/fyrfSfclrai^frie Securities Exchange Act extended the rules to all
\m&m, required the disclosure of insider trading, authorized the
Federal Reserve to set margin rates (see Chapter 2), and created
the Securities and Exchange Commission (SEC) to regulate the
market.
The G(ass-Steaga(( Act
xjto Hf^ This measure basically prohibited commercial banks from risking
yf^T\ their solvency by dabbling in the securities markets. It also created
KjL/nP the Federal Deposit Insurance Corporation (FDIC), which guaranteed
KCV^ personal bank deposits up to $2,500 and was funded by premiums
paid by member banks. (See Chapter 4 for more details on the
FDIC.)
Roosevelt wasn't crazy about the act because he thought it would
prove to be too large an undertaking for the federal government.
But he signed it anyway.
"The most far-reaching legislation
ever enacted"
After taking over in March 1933, the Roosevelt administration
moved swiftly to shore up two of the economy's main pillars:
banking and agriculture. On June 16, the last of The Hundred Days,
Roosevelt signed a bill addressing a third pillar: industry.
The bill was entitled the National Industrial Recovery Act (NIRA),
and Roosevelt somewhat grandiosely called it "the most important
and far-reaching legislation ever enacted by the American
Congress."
There were two main parts to the act:
One part relaxed antitrust laws, in return for which industries
were supposed to huddle up their members and draft
workplace standards that would ensure workers a fair wage
and decent hours, consumers a fair price, and companies a
fair profit. This provision was to be governed by the National
Recovery Administration, headed by a hard-drinking ex-cavalry
man named General Hugh "Iron Pants" Johnson. There was
also a section that guaranteed employees a right to organize
and bound industries to minimum wages, maximum workweeks,
and the abolition of child labor (see Chapter 1 1 for details on
this part of the NIRA).
Chapter 13: Roosevelt's New Deal 217
The second part of the act created the Public Works
Administration (PWA). The PWA was given $3.3 billion and
0 charged, under the direction of Interior Secretary Harold
^flikfc^^^pend it on public works projects that would create
V*t» afkWill needs around the country.
To pay for the measure, Roosevelt adroitly set up a fiscal plan
outside the normal federal budget. The plan essentially borrowed
money from the public and repaid it with higher taxes on
corporations and dividends and a tax hike on gasoline.
While signing the NIRA, Roosevelt declared that "it represents a
supreme effort to stabilize for all time the many factors which
make for the prosperity of the nation."
He was right about the effort part. General Johnson, lacking the
authority to force industry compliance, settled on a dual strategy
of convincing industry leaders it was a privilege to be a part of the
team and threatening them with consumer boycotts if they didn't
join.
Johnson staged mammoth parades and demonstrations in support
of the program. He sketched a blue eagle clutching a cogwheel and
a sheaf of lightning bolts. The symbol was to be displayed by all
companies that were part of the NIRA.
"While every American housewife understands that the blue eagle
on everything that she permits to come into her home is a symbol
of (her home's) restoration to security," Johnson said, "may God
have mercy on the man or group of men who attempt to trifle with
this bird."
Initial cooperation was encouraging. More than 2 million employ-
ers signed up, including most of the heavy hitters in major
industries. (Henry Ford was a notable exception.) But eventually
Johnson's cheerleading efforts wore thin. Many industries seized
the opportunity to fix prices — at increased levels — but weren't
as enthusiastic about abiding by fair labor standards.
Big companies in each industry dominated the drafting of industry
codes, so the needs of smaller firms were generally ignored.
Price-fixing kept prices high while discouraging incentive for
expansion, which in turn meant little or no increase in new jobs.
In addition, some key industries, such as agriculture, were not
included. And paperwork for the program was crushing: More than
10,000 pages of rules and regulations governed the NIRA.
/ $ Part IV: Fixing Things
The Public Works Administration fared somewhat better.
Administrator Harold Ickes was notoriously tight-fisted and
release^ money for projects slowly. He also hated make-work
le refused to "hire men to chase tumbleweeds on
Home-building efforts by the PWA were fiercely opposed by real
estate and construction lobbies and were generally unsuccessful.
But in its six years in existence, the PWA did spend $6 billion on
more than 34,000 projects that covered parts of virtually every
county in the United States. The projects included building aircraft
carriers for the Navy, post offices, courthouses, and more than 70
percent of the public schools built between 1933 and 1939. The
PWA built the Triborough Bridge in New York City, the Grand
Coulee Dam in Washington, and the Port of Brownsville in Texas.
Just as importantly, it employed more than 500,000 people per year.
No one tikes relief: The Cii/it
Works Administration
With generations-old traditions of self-reliance and individualism
imbued in them, most Americans hated the idea of making or
accepting handouts, even from the federal government.
^°Kds That included Roosevelt. When he signed the Federal Emergency
/fSjvX Relief Act in May 1933, FDR made it clear that he viewed it as a dire
xt'Z'Tl)) necessity and not a permanent solution. "President Roosevelt is
not 'relief minded,'" wrote journalist Gertrude Springer. "He sees
relief as a necessary evil to be got rid of at the earliest possible
date."
His "deputy president," Harry Hopkins, shared the president's
views. "I don't think anybody can go year after year, month after
month, accepting relief without affecting his character in some way
unfavorably," Hopkins wrote in June 1933. "It is probably going to
undermine the independence of hundreds of thousands of families."
So in October 1933, Hopkins suggested to FDR that the government
put the unemployed to work over the winter on temporary public-
works jobs. Roosevelt agreed, redirected money from the Public
Works Administration, and put the peripatetic Hopkins in charge.
The program was called the Civil Works Administration (CWA),
and it was hugely popular. In one town, 2,000 people showed up
for 155 jobs. In North Carolina, the number of applicants reached
150,000 in one week. The CWA was also popular with state
governments, which could hand off projects to it. "This civil works
Chapter 13: Roosevelt's New Deal 2
— ^ |— ^ and l cannot ui
DropBaaEs,
program is one of the soundest, most constructive policies of your
administration," Kansas Governor Alf Landon wrote to Roosevelt,
"and I cannot urge too strongly its continuance."
the CWA had hired 2.6 million people at wages
from 40 cents to $1 an hour. Within two months, there were
4 million people working. Much of the work was meaningful. The
CWA renovated 300,000 miles of roads and 40,000 schools, and it
built 150,000 "privies" in the South.
^jto Hf^ But some of the jobs were pure make-work. People were hired to
'vPlv^ balloons outside public buildings to frighten starlings. Others
— r^/W) were hired to count dogs. A word that had heretofore been used to
XsSv^ describe idle cowboys braiding scraps of leather to kill time came
to describe some of the CWA jobs: boondoggle.
By the spring of 1934, criticism of the program for not creating
enough jobs, pressure from businesses that didn't like the
competition, and fears that it would become hard to wean people
off federal jobs spurred the administration to abandon the CWA.
Starting the Second Neu/ Deal
By the end of 1934, the Roosevelt administration's efforts had won
widespread public approval. Roosevelt himself — and by extension
the Democratic Party — was immensely popular. Democrats
picked up 22 more House and Senate seats in the 1934 election,
and Roosevelt was lionized in some of the press. "No president in
so short a time has inspired so much hope," wrote The New York
Times.
Forty-one popular songs were written about FDR. Under Herbert
Hoover, the White House had received on average about 80 letters
a day. Under Roosevelt, the number reached 50,000 on some days.
Many people wrote to thank Roosevelt.
"Dear Mr. President," read one letter, "this is just to tell you that
everything is all right now. The man you sent found our house all
right, and we went down to the bank with him and the mortgage
can go on for awhile longer . . . you remember I wrote you about
losing the furniture too. Well, your man got it back for us. I never
heard of a president like you."
There were more quantifiable measurements of the New Deal's
success too. Unemployment had dropped by 2 million, and the
gross domestic product was up.
220 Part IV: Fixin9 Things
DropBcg
But there was also no shortage of statistics that suggested the
programs had not done enough. For example, 10 million people
were sti|l out of work in 1935. And there was no shortage of critics.
§^&;h as Father Charles Coughlin and Senator Huey
Wterana hammered Roosevelt, as did groups on the left
and right of the political spectrum. (See Chapter 9 for more on
FDR's critics.)
So Roosevelt recalibrated his efforts. Never a fan of federal spending,
FDR nonetheless decided to run up bigger budget deficits to
expand federal aid programs. He became more confrontational
with big business and pushed for tax increases on the wealthy
(known as "soak the rich" taxes) and the closing of tax loopholes.
But at the same time he embraced positions favored by those on
the political left, he also decided to steer federal aid away from
direct relief programs.
"The federal government must and shall quit this business of
relief," he told Congress in January 1935. "We must preserve not
only the bodies of the unemployed from destruction, but also their
self-respect, their self-reliance and courage and determination."
Generating jobs through the Works
Progress Administration
In January 1935, Roosevelt's right-hand man, Harry Hopkins, told
Congress that if it would allocate the money, the federal government
would put millions of Americans to work on public works projects
all over the country. (A senator once asked Hopkins if such
programs were wise "in the long run," to which Hopkins retorted:
"People don't eat in the long run, senator, they eat every day.")
^to Hfi^ In April, Congress complied, and the Works Progress Administration
y^r^^N (WPA) was begun, under the auspices of Hopkins. The WPA was a
K_^2jy ^ar more ambitious program than previous federal jobs efforts. Over
xlEv^ its eight-year run, the program spent $ 1 1 billion (about $ 1 70 billion
in 2008 dollars) and created 8 million jobs.
The variety of jobs was impressive. The administration oversaw
projects from excavating and preserving Native American burial
grounds to putting on Shakespeare's Macbeth with an all-African
American cast. Like other programs, the WPA did a lot of public
works construction. Its workers built 110,000 public schools,
libraries, post offices, courthouses, and government office
buildings. They constructed 100,000 bridges and 600 airports,
and they paved 500,000 miles of roads and highways.
Chapter 13: Roosevelt's New Deal 22 /
The WPA also provided jobs in areas where other public works
projects had never ventured. Writers, singers, artists, and
actors were employed to write, sing, paint, sculpt, and act.
fHy/cVMnffists were hired to document the era. When asked if
wroie^mos^ef jobs were the wisest investment for taxpayer
dollars, Hopkins shrugged and said "hell, they've got to eat, just
like other people."
Like almost all of the New Deal's programs, the WPA was widely
criticized from the right and left. Liberals decried its policy of
allowing women and minorities to be paid less than white men.
Conservatives scoffed that WPA stood for "We Poke Along" and
charged that by guaranteeing the wages of workers, the program
eliminated any incentive for them to excel. The WPA was also
criticized for being too expensive because its construction costs
were often higher than private construction.
In 1939, a nationwide poll asked Americans what they liked best
and what they liked least about the New Deal. The answer in both
cases was the WPA.
Establishing Social Security
While governor of New York, Roosevelt had explored the idea
of a government-run insurance system that would provide some
security for senior citizens after they left the labor force. It would
also provide a backstop for unemployed people and the dependents
of workers who died suddenly. As president, Roosevelt approached
the subject cautiously, waiting until the time seemed right to push
the idea.
That time seemed to come in 1934. Americans were becoming
increasingly enamored with the idea of a government-run old age
pension plan. Much of the interest was stirred by an eccentric
California doctor named Francis Townsend, who had proposed
a simple-sounding but economically nutty pension system. (See
Chapter 9 for more on Townsend and his plan.)
"The Congress can't stand the pressure of the Townsend Plan
unless we have a real old-age insurance system," Roosevelt told
his labor secretary, Frances Perkins, "nor can I face the country"
without an alternative plan.
^to Hfi^ Roosevelt named an "Economic Security" committee to come up
4&T^f~\ with a plan, and in January 1935 he asked Congress to approve
- rLV^w the creation of a pension system. It would be paid for in part by
x§Ev^ employers and in part by a payroll tax deducted from wages,
222 Part IV: Fixin9 Things
starting in 1937. To build up a reserve, the first payments would
not be made until 1942. Provisions were also made for lump-sum
payments to survivors of workers who died and for aid to children
died or were unable to work.
Despite furious protests from conservative newspapers and others
that the plan smelled of socialism, Congress rather easily approved
it, and Roosevelt signed it in August 1935.
The plan had several serious flaws. For one thing, it excluded large
groups of workers, particularly those dominated by women and
minorities, such as domestic help and farm labor. For another, it
was a regressive tax, meaning that low-wage earners paid the same
rates as high-wage earners, and the tax applied only to the first
$3,000 of income.
But even with its flaws, the Social Security Act would prove to be
one of the most important legacies of the New Deal. Even detractors
were impressed by how quickly and efficiently the act's programs
were put into place amid a blizzard of paperwork. Figure 13-1
shows a government ad promoting the program.
It works
LrtCIAX SECURE
987-65-4320
|UEE THOMAS
LbHS, SiCNATUNI
...when
you can't.
Survivors and disability benefits, too.
Figure 13-1: This 1937 government poster advertised
the benefits of the Social Security system.
Chapter 13: Roosevelt's New Deal
Feuding With the Supreme Court
DropBadte
It generally had his way with Congress during his
as not so fortunate with the U.S. Supreme Court.
Dominated by elderly conservative justices (one was 80 years
old, five were in their 70s, and none were under 60), the court
overturned several key components of the New Deal.
In a 1935 case that pitted the federal government against a kosher
poultry business from Brooklyn, the court ruled that in approving
the National Industrial Recovery Act (NIRA), Congress had delegated
power to the executive branch in ways "utterly inconsistent with
the constitutional prerogatives and duties of Congress."
The Court also overturned the Roosevelt administration's key
piece of farming legislation, the Agricultural Adjustment Act. And
it threw out a minimum wage law enacted by the state of New
York, threatening the administration's plans for a federal minimum
wage law.
The court's rulings infuriated Roosevelt, who referred to the
justices as relics of "the horse and buggy age." In February 1937,
FDR proposed to Congress that he be allowed to appoint a federal
judge for every judge that refused to retire after he reached 70.
The "court packing" ploy would have raised the number of justices
on the Supreme Court from 9 to 15.
"We have . . . reached a point as a nation where we must take
action to save the Constitution from the court and the court from
itself," Roosevelt explained in a radio fireside chat. "We must find a
way to take an appeal from the Supreme Court to the Constitution
itself."
Most Americans didn't buy into the idea. "As an American who is
a lover of liberty, I cry out against your wicked proposal," wrote
the owner of a Cleveland fruit packing company, "to undermine the
American institution by packing the Supreme Court, thus making it
a puppet under yourself."
Congress eventually rejected the idea. The proposal, however,
apparently got the attention of the court. Even before Congress
voted the plan down, justices began handing down decisions that
upheld New Deal programs that included the Social Security Act,
minimum wage laws, labor union organizing rights, and farm
legislation. Moreover, most of the court's justices retired, allowing
Roosevelt to name their successors.
22 £} Part IV: Fixing Things
But the fight left Roosevelt with a political black eye from which
he did not fully recover. Republicans made substantial gains in
3ns, which, combined with the country's entry into
enerally marked the end of the New Deal.
Assessing the New beat
Did the New Deal end the Great Depression? No. Did it help end
it? Probably not. Did it make things more palatable for Americans
living through the period? Probably. Did it have a deep and lasting
impact on the United States? Absolutely.
^tABE/? That the New Deal hadn't cured the country's economic blues was
&{$\ obvious as early as 1937. True, the national annual income had
\ mm ) climbed from $40 bmion in 1932 to $72 billion. But after being
V^S^ re-elected in 1936, Roosevelt had decided that inflation was
enough of a threat that it was time to rebalance the federal budget.
That meant cutting back on New Deal programs such as the Works
Progress Administration.
When federal spending dipped, so did the economy. Unemployment
went back up, from 14 percent to almost 19 percent between 1937
and 1938. Steel, automobile, and other industries' production fell,
and Roosevelt and Congress responded with a $5 billion spending
program that helped start the economy upward again by 1939. But
combined with earlier spending efforts, the boost meant that by
1940, the national debt had nearly doubled from the $22.5 billion it
had been when Roosevelt took office. Unemployment remained at
an unhealthily high 17 percent.
Many, if not most, historians believe that it wasn't until the country
began cranking up its production of war materials that the United
States finally shook off the icy grip of the Great Depression. (This
belief has led to the wry observation that maybe German dictator
Adolf Hitler did more to end the Great Depression than did
Roosevelt.)
The New Deal did succeed in giving Americans hope during the
depression's darkest days. That fact was reflected during the 1940
presidential election, in which Americans gave Roosevelt some-
thing no president before him had been given: a third term.
^jABE/? But the real impact of the New Deal went far beyond programs
&{$\ designed to counter a temporary, if lengthy, economic recession.
( UM j It created the template for much of the modern U.S. political and
V^^/ governmental system.
Chapter 13: Roosevelt's New Deal
s, President Calvin Coolidge had noted with no
accuracy that "if the federal government should go
2, the common run of people would not detect the
e affairs of their daily lives for a considerable length
By the late 1930s, that statement was no longer true. For good or
ill, the New Deal firmly established the federal government as the
preeminent player in public life:
It laid the foundation for the modern safety net of social
services.
v0 It cemented the federal government's role in regulating the
economy.
It popularized the idea that the federal government had a duty
to provide security for those on the margins of society.
c" It fostered the development of the modern labor movement.
It made the government a leading player in U.S. agriculture.
And the New Deal also forged the coalition of interests that formed
the core of the Democratic Party for the rest of the 20th century
and into the 21st.
Lessons Learned
The New Deal instituted a host of federal government safeguards
that ranged from the minimum wage to stock market regulations,
and from insured bank deposits to agricultural product price
supports. Here's a look at one of the New Deal's biggest legacies —
Social Security — and an area it left largely untouched — health
care.
Paying for Social Security
In January 2008, a 62-year-old Maryland woman named Kathleen
Casey-Kirschling received a check from the Social Security
Administration. What made her check unique was that it was
thought to be the first paid to one of the baby boomers: the
estimated 80 million Americans born between 1946 and 1964.
The cost of covering Social Security benefits for all the baby
boomers to follow Casey-Kirschling is the biggest worry faced by
the system in the 21st century.
In the late 1920
small degree of
out of existeno
220 Part IV: Fixin9 Things
Since its inception, the Social Security system was on a pay-as-
you-go basis: Current workers paid for the benefits being collected
by someone else. Surplus funds were put into a trust account to
icTfcw^rViL^sC^-tfalls.
The system worked well enough until the mid-1970s, when
Congress decided to tie Social Security benefits to increases in the
cost of living, with the expectation that payroll taxes to fund the
system would keep pace as wages increased. But between 1978
and 1982, inflation soared by 60 percent while wages didn't grow at
all. The result was that Social Security experts predicted the fund
would be running in the red and forced to dip into reserves within
a year or two.
In 1982, President Ronald Reagan and Congress agreed to close the
gap by increasing payroll taxes and gradually raising the minimum
age for full Social Security benefits from 65 to 67.
In the fiscal year that ended in September 2008, the government
collected $785 billion in payroll taxes from approximately 163
million workers to finance $585 billion in benefits for 50 million
pensioners. And the trust fund had assets of approximately $2.2
trillion.
But critics of the system point out that while there were 42 workers
making payments into the system for every pensioner at the end of
World War II, there were only about three workers per pensioner
in 2008. And as the baby boomers age, the gap is expected to close
to two-to-one. The system is projected to begin running a deficit in
2016.
In addition, critics say, the trust fund consists of assets that amount
to little more than IOUs from the federal government, which routinely
uses surplus payroll tax revenues for other government operations.
Defenders of the system say such criticism is nonsense because all
government bonds are essentially IOUs, and the U.S. government
backs the special bonds held by the trust fund as it does all
government bonds.
But both sides of the debate agree that by the middle of the 21st
century, adjustments will be needed to allow the system to cover
its obligations. Those adjustments could be further changes in the
minimum retirement age, increased payroll tax rates, or lowered
benefits.
Chapter 13: Roosevelt's New Deal 22 7
Closing the NeuJ beat's health gap
^^/ejal bLPj^sident Roosevelt's top aides wanted to include health
wnj^rajip^ipliie Social Security Act. But "here," according to a
September 1935 story in The Nation magazine, "the reactionary
American Medical Association got busy at once and succeeded in
suppressing any suggestion for health insurance."
Roosevelt decided the idea was too controversial and would put
the whole bill at risk, so he delegated it to the political limbo of
"further study." There it languished for 30 years. Roosevelt's
successor, Harry Truman, asked Congress for the establishment of
a national health insurance plan. Truman's request went nowhere,
and the focus of reformers shifted from covering everyone to
covering only those eligible for Social Security coverage.
In 1965, President Lyndon B. Johnson signed into law the
establishment of the Medicare and Medicaid programs. Medicare
extended government-sponsored health coverage to Americans
aged 65 and older. Medicaid provided coverage for those receiving
other safety-net services, such as welfare and aid to children, the
blind, and the disabled. Medicaid went into effect on January 1,
1966, and Medicare six months later.
In 1993, President Bill Clinton pushed a massive overhaul of the
nation's healthcare system, which had become plagued by soaring
costs, confusing programs, and decreasing accessibility to the
unemployed and uninsured. But the medical and insurance
industries squashed the effort. In 2003, President George W. Bush
signed into law a major change in Medicare that created new
prescription benefits and other changes.
In 2009, President Barack Obama pledged to seek a universal
health insurance system that included elements such as the choice
of doctors, protection against financial catastrophe, lower cost
growth, and improved patient safety.
228 Part IV: Fixing Things
DropBooks
Chapter 14
Learned from the
Great Depression
In This Chapter
Recapping the Great Depression
Summarizing the post-World War II economy
Defining the differences between 1929 and 2009
Putting the lessons of the Great Depression to work
rhe Great Depression ended roughly with the beginning of
World War II. Ever since, it has been the comparative for every
burp or bump to come along in the U.S. economy. Nothing like it
has occurred in the seven subsequent decades. But could an
economic disruption as cataclysmic as the Great Depression
happen again?
This chapter addresses that question by first summarizing what
happened to the U.S. economy between late 1929 and 1941, and
then looking at how the economy has fared since the end of World
War II. I consider the similarities and differences between the Great
Depression and the recession that began in late 2007. And the
chapter concludes with how the lessons from the Great Depression
apply to the modern world.
Art OverView of the
Great Repression
As I point out in Chapter 4, economists and historians have argued
for decades about what the precise cause (or causes) of the Great
Depression was (or were). It's not just an academic argument.
Part IV: Fixing Things
Knowing what caused the Great Depression to happen could be
vitally important in knowing how best to prevent it from happening
in mind, following are summaries of some of the
e of the consequences of the Great Depression.
Creating an economic disaster
What do most historians and economists blame for the economic
meltdown that was the Great Depression? Here are the most
commonly mentioned culprits.
An overabundance of available credit
The development and widespread use of credit to purchase
big-ticket consumer items such as cars and refrigerators greatly
increased consumer debt in the decade prior to the start of the
Great Depression. Consumer debt rose from $2.6 billion in 1920 to
$7.1 billion in 1929, a 173 percent increase. When hard times hit,
many people found themselves not only short of cash but saddled
with debts they couldn't pay. That situation caused trouble not
only for them but also for the people to whom they owed money.
A bia disparity in the distribution of Wealth
Although the 1920s were, overall, a decade of prosperity, the
wealth was by no means evenly shared. While the average worker's
wages went up only 9 percent, the incomes of the wealthiest
1 percent of Americans soared 75 percent. Much of that wealth
was put into luxury items that created few jobs, or into speculative
investments that added very little to the economy.
Speculation in the stock market
Although relatively few Americans were directly invested in the
market, it nonetheless sucked up a good deal of capital, which
drove stock prices far beyond any grounding in real value. The
price bubble was inflated on investors' expectations that someone
would pay more for the securities than they did. Then the bubble
burst in late October 1929, and hardly any buyers could be found.
A shaky financial industry
Many of the country's banks were underfunded, overextended, too
deep in speculative investments, and not very well regulated (if
they were regulated at all).
Too much stuff
By the end of the 1920s, the country was producing an estimated
17 percent more than it could buy. When the economy slowed
Chapter 14: Lessons Learned from the Great Depression
down in the wake of the stock market crash, manufacturers with
big inventories on their hands shut down production and laid off
workers, which stifled consumption even more.
Faced with a massive — and growing — crisis, the federal govern-
ment took steps that were either wrong or too feeble. These steps
included the Federal Reserve Board raising interest rates to stifle
speculation, only to have the action restrict the supply of money
at the wrong time. President Herbert Hoover and Congress also
approved a sizeable tax increase to pay down the federal budget
deficit, which also shrank the money supply. And they approved a
trade tariff that led to an international trade war.
Whatever the leading causes of the Great Depression, the
consequences were pretty evident — and devastating:
V Private capital investment fell from $35 billion in 1929 to $3.9
billion in 1933. Adjusted for inflation, the gross domestic
product dropped 25 percent between 1929 and 1933, and the
national income dropped 50 percent.
More than 6,000 banks failed, taking $2 billion in depositors'
money with them. Lending came virtually to a halt.
V Unemployment reached a peak of 24.9 percent in 1933. Many
families had only one wage earner, which meant that 30 percent
to 40 percent of Americans had no regular income at all.
f About 300,000 businesses failed between 1929 and 1933 —
approximately 14 percent of all the businesses in the country.
In 1933, home foreclosures were running at 1,000 per day. By
the beginning of 1934, half of the residential mortgages in the
country were in arrears.
The economic miseries in the United States both complemented
and exacerbated the problems in other countries, ensuring
that the Great Depression would be global in its reach.
j** Between September 1929 and July 1932, the Dow Jones stock
index, a weighted average of 30 major companies' stock
prices, fell 89 percent.
y* Prices in general fell 25 percent between 1929 and 1933,
making many assets, such as houses, worth less than the
money owed on them.
'he utrontf economic medicine
Dealing tilth the consequences
232 Part IV: Fixin9 Things
Recessions after the
The Great Depression was the King Kong of the U.S. economy's
downturns. It easily dwarfed all the recessions before it (although
the recessions in the 1870s and 1890s — see Chapter 3 — were
pretty grim too), and we haven't seen anything like it since. But
that doesn't mean the economy has been all milk and honey since
the Great Depression ended.
In fact, according to the official arbiter of recessions — the business
cycle dating committee of the National Bureau of Economic
Research (see Chapter 2) — 11 recessions have occurred since
World War II ended.
On average, the first ten recessions lasted 10M months. (I can't
report the duration of the 11th recession because it wasn't over as
of this writing.) On average, unemployment rates increased a
maximum of 2.5 percent. And the gross domestic product, adjusted
for inflation, dropped an average maximum of 1.9 percent.
Those are relatively mild averages. For example, the average
length of lO'/z months is just half of the average 21 months that
recessions lasted prior to the Great Depression.
Debating "the Great Moderation"
Some economists have called the post-war pattern of milder
recessions "the Great Moderation." But because economists like to
argue about nearly everything, there is disagreement about what
caused the more moderate recessionary periods.
One theory is that better information-gathering techniques allowed
the Federal Reserve Board (see Chapter 2) to stay on top of the
economic situation and ease up or tighten interest rates. Doing so
has allowed the money supply to increase when recessions hit and
decrease when inflation is a threat.
Another theory is that the expansion of service industries' role in
the U.S. economy made it less prone to the ups and downs of an
economy based heavily on manufacturing. At the same time, the
theory goes, manufacturers and retailers did a better job of main-
taining inventories at levels that neither flooded the market nor
starved it.
Chapter 14: Lessons Learned from the Great Depression 233
And some people believe that an expansion of credit following
World War II enabled people to adopt buy-now, pay-later spending
pattern j instead of everyone stopping spending when times get
tithly credit card payments helped keep things rolling.
■— ^ patterns instej
DropBooKS
Looking at post-War recessions
Whatever the reasons, the result is that nothing like the Great
Depression has come along in the post-war United States — so far.
Here's a look at the 1 1 recessions that have occurred since 1945.
ms
Economists say this 1 1-month downturn, which began in November
1948, was a "natural down cycle" caused by the economy adjusting
to post-war production. The unemployment rate reached 7.9 percent;
the gross domestic product (GDP) dropped by 1.8 percent.
1953
Beginning in July 1953, this ten-month recession has been attributed
to the Federal Reserve Board (the Fed) tightening money supplies
in an effort to head off inflation following the end of the Korean
War. The federal government diverting more money into national
security intensified the problem. Unemployment climbed to 6.1
percent, and the GDP dropped by 2.7 percent.
1957
This recession lasted only eight months, starting in August
1957, and was attributed to the Fed tightening money supplies.
Unemployment climbed to 7.1 percent, and the GDP dropped
by 3.7 percent. Interestingly, the Dow Jones Industrial Average
dropped 19 percent during this recession after holding steady in
the more severe 1953 recession.
1960
A ten-month recession that began in April 1960 was triggered by a
combination of high inflation and growing unemployment (which
reached 7.1 percent). Increased government spending ended it.
The GDP dropped 1.1 percent.
1969
This relatively mild 1 1-month recession that began in December
1969 was again caused by increasing inflation and declining
employment. Unemployment peaked at 6.1 percent; the GDP
dropped by 0.2 percent.
23fy Part IV: Fixin9 Thin9s
1973
This one was a nasty bugger, beginning in November 1973 and
ths. It was caused by a combination of factors. The
f Petroleum Exporting Countries (OPEC) quadrupled
oil prices as~a consequence of war in the Middle East. Inflation
soared, partly as a result of federal spending (on the Vietnam War
and social service programs) and partly because the United States
went off the gold standard (see Chapter 7).
,0
President Richard Nixon imposed wage-and-price controls, which
kept prices so high that demand fell. The result was stagflation, a
relatively rare economic condition that combines recession with
inflation. Unemployment reached 9 percent; the GDP dropped 3.1
percent.
1980
This recession was actually just a preview of a much nastier one
that began in 1981. The 1980 version started in January 1980 and
ended in June.
1981
This 16-month-long recession began in July 1981 and was widely
considered to be the worst since the Great Depression. It's usually
attributed to two causes:
A revolution in Iran that resulted in sharply higher oil prices.
Interest rates that were raised to the highest level since the
Civil War in an effort to fight inflation.
Unemployment soared to a post-Depression record high of 10.8
percent, and it stayed above 10 percent for ten months. The GDP
dropped 2.9 percent.
1990
This relatively mild eight-month recession that began in July 1990
was most probably a result of a crisis in the savings and loan
industry the year before.
2001
An eight-month recession that began in March 2001 was sparked
by a severe downturn in Internet businesses (the "dot-com indus-
try") and aggravated by the terrorist attacks of September 1 1 .
Unemployment hit 6 percent, but the GDP dropped hardly at all.
Chapter 14: Lessons Learned from the Great Depression
2007
This recession began in December 2007 and, as of March 2009, was
aatejajij JJs J^th month. That duration made it at least as long as
(arfl|rApi|igl^since the Great Depression.
The causes of what was sometimes wryly referred to as "the Great
Recession" were rooted in the bursting of a real estate bubble in
the United States.
Simply (and simplistically) put, lenders made home loans to a
large number of people who couldn't afford them. The loans were
"bundled" together and resold as securities. When the borrowers
began defaulting on the loans, the securities lost value. Major
lenders and other firms that dealt in the mortgage-based securities,
from banks to the world's largest insurance company, went belly
up or were financially crippled.
The collapses and crippling, in turn, shocked the stock market.
The market lost almost 50 percent of its value between December
2007 and March 2009. Unemployment reached 8.1 percent, and the
gross domestic product dropped 2.2 percent.
How Things Ha</e Changed
since 1929
Once upon a time, the U.S. stock market fell sharply. Financial
institutions that had made unwise and highly speculative investments
began to teeter; some collapsed. Home mortgages were foreclosed
at an accelerating rate. Some people had dangerously overextended
their credit and were facing debts they couldn't pay.
Other people feared times would get worse, so they quit spending.
That action caused manufacturers to produce less and lay off
workers, which raised unemployment levels, which increased fears
of an economic collapse, which led to even less spending.
The economic mess was precipitated by, in the words of a
prominent economist at the time, "an abundance of greed and an
absence of fear (that) led some to make investments not based
on the real value of assets, but on the faith that there would be
another who would pay more for those assets."
"At the same time," the economist continued, "the government
turned a blind eye to these practices and the potential consequences
for the economy as a whole."
DropB
230 Part IV: Fixin9 Things
^ President (rrai
DropBoofe
"[EJventually however," he said, "greed gave way to fear ... it is
the transition from an excess of greed to an excess of fear that
President (Franklin) Roosevelt had in mind when he famously
the only thing we have to fear was fear itself."
The economist was Lawrence Summers, who was Secretary of the
Treasury not under Roosevelt but under President Bill Clinton,
and who was named director of the National Economic Council by
President Barack Obama.
Summers wasn't speaking in 1933 about the Great Depression.
He was speaking in mid-March 2009 about a worldwide recession
that began in late 2007 and was on to the verge of becoming the
longest economic downturn in the United States since the Great
Depression.
The numbers from the 2007 recession were indeed sobering:
$50 trillion in wealth was erased worldwide between late 2007
and spring 2009, $7 trillion of it from the U.S. stock market and
$6 trillion from U.S. real estate.
v0 The gross domestic product decreased and the unemployment
rate increased at the fastest rates in more than half a century;
at least 4.4 million jobs were lost in the United States alone.
In addition, the net worth of many Americans suffered a double
whammy, as securities in the form of stocks, mutual funds, and
retirement programs such as 401(k) plans took a big hit at the
same time that real estate valuations headed south in a hurry.
In a speech in early March 2009, Christina Romer, the White House
chief economist, acknowledged she had found herself "uttering the
words 'worst since the Great Depression' far too often: the worst
twelve month job loss since the Great Depression; the worst
financial crisis since the Great Depression; the worst rise in home
foreclosures since the Great Depression."
But, Romer noted, for as many similarities as there were between
the Great Depression and the recession that began in late 2007,
there were probably more key differences.
That's "trillion/' with a "T"
According to the online news archive Nexis, the term "trillion dollars," or close vari-
ations of it, appeared in U.S. newspaper stories 410 times in all of 1989. It appeared
1,918 times in the month of February 2009.
Chapter 14: Lessons Learned from the Great Depression
That analysis is borne out by comparing some of the numbers
from the two periods:
'Jones Industrial Average fell 89 percent between
ItSrftfeer 1929 and July 1932. The drop between December
2007 and March 2009 was 49 percent.
The economy contracted 25 percent between 1929 and 1932.
Between 2007 and 2009, it contracted about 6 percent.
The unemployment rate during the Great Depression peaked
at 24.9 percent in 1933. In March 2009, it was at 8.1 percent.
Moreover, there were far more two-income families in 2009
than in 1933, which helped ease the sting if one of the wage
earners lost his or her job.
While an estimated 50 percent of all home mortgages were in
arrears in 1933, the figure was 12 percent in early 2009.
"If what we have now is a rainstorm," economist and writer Amity
Shlaes said in a January 2009 appearance on National Public Radio,
the Great Depression "was a (Hurricane) Katrina."
The Leqacy of the Great depression
The impacts of the Great Depression on 21st-century America are
measurable in several ways. One way is that, for good or ill, the
Great Depression significantly enhanced the role the federal
government plays in the U.S. economy. When economic trouble
hits, most Americans look quickly to Washington to see what the
government is going to do about it.
Much of that expectation is based on the legacy of federal govern-
ment programs that were first created in response to the Great
Depression itself and exist today as safeguards against some of the
worst blows of a recession.
^jABE/f Those programs include federal insurance against the loss of bank
deposits; insurance against unemployment; a federal pension
system for the elderly and disabled; and programs that provide
food, shelter, and financial aid to the needy.
Those Great Depression legacy programs have been joined in the
decades since by other "safety net" components such as federal
health insurance for senior citizens and the poor, and safeguards
such as checks on abuses of the stock market and increased
vigilance over the money supply.
238 Part IV: Fixing Things
DropBo©,
The public's expectation of government intervention has also
engendered a feeling of obligation in most post-Depression
governments to act quickly — if not always wisely — in the face
roblems. For example, after taking office in January
t Barack Obama quickly launched a three-pronged
attack on the deepening recession that had begun in 2007:
Less than a month after taking office, Obama signed the
American Recovery and Reinvestment Act (ARRA), the
largest economic stimulus effort in U.S. history. The $800
billion act included funds for everything from income tax
breaks to extended unemployment benefits to money for state
programs to financial incentives for buying new cars and first
homes.
v0 The second prong was called the Financial Stability Plan,
which included elements that ranged from the government
buying up or refinancing mortgage, student, and small busi-
ness loans as a way of getting non-bank lenders back on their
feet, to injecting federal funds into stressed banks.
y* The third prong was the Helping Families Save Their Homes
Act, which was designed to make it easier to modify home
mortgages and reduce the rising numbers of foreclosures that
were mainly a result of the real estate bubble bursting in 2007.
"The president is committed to an approach that moves aggressively
on jobs, on credit, on housing," said Summers, Obama's chief
economic advisor, in a March speech to the Brookings Institute.
"In this effort, he has insisted that we be guided by the recognition
that the risks of overreaction are dwarfed by the risks of inaction."
The final lesson to be learned from the Great Depression is that all
bad things, like all good things, come to an end. While historians
and economists argue as to what, if anything, worked to help end
the Great Depression, the inescapable fact is that it did end.
"If we continue to heed the lessons of the Great Depression," noted
economics historian and presidential adviser Christina Romer in
March 2009, "there is every reason to believe that we will weather
this trial and come through to the other side even stronger than
before."
DropBooks parjy
The Part of Tens
The 5th Wave By Rich Tennant
DropBooks
In this part . . .
J\lo book For Dummies is complete without The Part of
# w Tens. This part features lists of ten good movies
either made or set in the Great Depression, ten things that
were invented or popularized in the period, and ten things
that weren't all that depressing about the Great
Depression.
(Someday there oughta be a book For Dummies with
nothing but Parts of Tens. . . .)
Chapter 15
Movies Made in or
about the Great Depression
Thousands of movies were made during and about the Great
Depression, so it's tough to pare the list down to just ten good
ones. My chief criterion was that they tell viewers something about
what the period was like.
The Public Enemy (1931)
Stars: James Cagney, Jean Harlow. Director: William Wellman.
Cagney plays Tom Powers, a working-class kid who "wises up"
and becomes a bootlegger and hoodlum, only to get gunned down
at the end of the film.
Although Cagney's character is supposed to be a bad guy — in
one famous scene he mashes half a grapefruit in the face of his
girlfriend — Cagney was so charismatic that many people in the
audience felt bad when Tom Powers was killed. The film, a hit at
the box office, was made before Hollywood established its self-
censorship board in late 1934. It was one of the reasons the censor-
ship code, which effectively banned gangster movies, was adopted.
(See Chapter 9 for more on gangster films during the 1930s.)
1 Am a Fugitive from a
Chain Gang (1932)
Stars: Paul Muni, Glenda Farrell. Director: Mervyn LeRoy. Based
on a real-life story, the film follows a guy (Muni) who is wrongfully
charged with a crime and sentenced to hard labor on a Georgia
chain gang. He makes a daring escape and lives a successful life
under an assumed name for seven years. He is eventually tricked
into surrendering with the promise of lenient treatment, only to
find himself back on the chain gang. He escapes again, and as the
movie ends, he is still on the lam.
2(}2 Part V: The Part of Tens
This film was controversial when it was released because of its
depiction of the way prison inmates were treated. It also disturbed
^ audiences because its ending was neither happy nor conclusive.
J }TC\ 1T\ ftyf^nG ©ne' when his lover asks how he lives as a fugitive,
L-/ I >/ k«/ I— ' \Mimii lh\fti?ter says, "I steal," as he slips into the darkness. Great
Depression audiences undoubtedly felt great empathy with the
injustice of Muni's character's situation.
Gabriel Over the White
House (1933)
Stars: Walter Huston, Karen Morely. Director: Gregory La Cava.
This is one weird movie. Huston plays Judson Hammond, a new
U.S. president who is a good-time guy and stooge for political party
bosses. Then he has a car accident, gets a visit from the archangel
Gabriel, comes out of a coma, and assumes power as dictator. He
takes over Congress, finds public works jobs for the unemployed,
rounds up gangsters and has them shot, and bullies other countries
into paying their debts to the United States and signing an
international peace treaty. He dies a hero to the world.
The film was based on a novel by an ex-British general and brought
to the screen by newspaper baron William Randolph Hearst. It was
produced with the approval of Roosevelt, whom Hearst backed
in the 1932 election. Hearst apparently meant it as something of a
guide for FDR to follow. Roosevelt called it "an intensely interesting
picture." It was a big box office hit in 1933 but faded into obscurity,
as did Hearst's support for FDR by the end of 1933.
Gold Diners of 1933 (1933)
Stars: Dick Powell, Ruby Keeler. Director: Mervyn LeRoy. A 1933
critic called it "an imaginatively staged, breezy show, with a story
of no (great) consequence." That was fine with Depression-era
audiences. Musicals offered an escape for people who came to see
the lavish song-and-dance numbers — not to gain insight into the
human condition.
Based on a hit Broadway play, Gold Diggers actually had two
directors: LeRoy for what little plot there was (struggling actresses
and songwriter get big breaks on Broadway), and showman Busby
Berkeley for the musical numbers. There is one politically charged
song, "Remember My Forgotten Man," that's about the World War I
vets who had hit hard times. (Read more about them in Chapter 4.)
_ Chapter 15: Ten Good Movies Made in or about the Great Depression
Dead End (1937)
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rea, Humphrey Bogart, Sylvia Sidney. Director:
This film is set at New York City's East River, where
residents of luxury apartments view the river while trying to ignore
the slums along its banks. A gang of poor kids bully and then
accept a rich kid; gangster Bogart tries to kidnap the kid; out-of-
work architect McCrea kills Bogart; and one of the poor kids does
the right thing and turns himself in for stabbing the rich kid's dad.
The film was spawned from a hit Broadway play. It's notable both
for its depiction of inner-city life during the Great Depression (The
New York Times' review called it "disturbingly accurate") and the
debut of the Dead End Kids, a group of young male actors who
would go on to star in nearly 90 low-budget films through 1958.
The Grapes of Wrath (1940)
Stars: Henry Fonda, Jane Darwell. Director: John Ford. Based on
John Steinbeck's novel (see Chapter 8 for more on the book), the
film is the story of the Joads, an Oklahoma family that has been
forced off its farm and migrates to California. At the end of the film,
the eldest son (Henry Fonda) kills a man and leaves the family,
presumably to fight social injustice.
The film tones down the novel, as well as injecting extra optimism.
"They can't wipe us out and they can't lick us," says Darwell as the
matriarch of the family. "We'll go on forever Pa, 'cause we're the
people." Despite its somewhat exaggerated portrayal of the "Okie"
migration, the movie is often listed as among the best of all time.
They Shoot Horses, Don't
They? (1969)
Stars: Jane Fonda, Michael Sarrazin, Gig Young. Director: Sydney
Pollack. Based on a 1935 novel, this film tells the story of people in a
dance marathon, which people participated in (along with other types
of endurance contests) because they were desperate for money in the
1930s. (See Chapter 4 for more on endurance contests.) As the mara-
thon drags on, an unscrupulous emcee comes up with gimmicks that
entertain the audience while adding to the dancers' misery.
Although the film takes place almost entirely within a ballroom, it
does give audiences a glimpse into how the desperate circumstances
of the Great Depression led to desperate efforts by some people.
2£)£) Part V: The Part of Tens
Sounder (1972)
DropBoaks
yson, Paul Winfield, Kevin Hooks. Director: Martin
a young adults' book, the film concerns an African
American family of sharecroppers in Louisiana during the Great
Depression. The father (Winfield) is arrested after stealing food for
his hungry family and is taken off to a labor camp. The son (Hooks)
goes off in search of his dad and winds up at the home of a
schoolteacher (Tyson), who encourages the boy's desire for an
education. Sounder? He's the family dog.
While a bit schmaltzy, the movie affords a view of how tough
things were for rural African Americans in the 1930s. For more on
that topic, see Chapter 5.
Bound for Glory (1976)
Stars: David Carradine, Ronny Cox. Director: Hal Ashby. This film
is based on the life of folk singer/political activist Woody Guthrie.
Guthrie lived the life of the people he sang about: the hardest-hit
victims of the Dust Bowl and the hard times. (See Chapter 6 for
more on the Dust Bowl.)
The film is based on a 1943 autobiography and follows Guthrie
(Carradine) on his trek to and around California in the late 1930s.
Unlike The Grapes of Wrath, the film shows what life was like for
"Okies" in both rural and urban settings.
Cinderella Man (2005)
Stars: Russell Crowe, Renee Zellweger, Paul Giamati. Director:
Ron Howard. This biographical film traces the life of James J.
Braddock, a promising boxer in the late 1920s who gets hurt and
is forced to take menial jobs just as the Great Depression is begin-
ning. Desperate to feed his family of five and forced to go on relief,
Braddock (Crowe) goes back to boxing and beats long odds to
become the heavyweight champion.
The movie accurately depicts Braddock as the hero of millions
of other Americans down on their luck in the 1930s, and it shows
how close to disaster so many people's lives were in the Great
Depression.
Chapter 16
Invented or
Popularized in the Great
Depression
/ * lecessity is the mother of invention (and laziness the father),
# W and there was certainly a lot of necessity during the Great
Depression. So maybe it's not surprising that a lot of stuff was
invented, improved, or popularized during the period. Here's a
look at just ten such things.
Sliced Bread (1930)
Ever hear the saying "It's the greatest thing since sliced bread"
and wonder how long that actually means? In 1930, the Continental
Baking Co. began marketing pre-sliced Wonder Bread around the
country. A reliable slicing machine had been perfected in 1928,
making the mass production of pre-sliced bread possible.
Sales lagged at first because consumers were suspicious of any-
thing so convenient. But by 1933, 80 percent of bread sold in the
United States was pre-sliced and wrapped. For a brief time during
World War II, the federal government banned the sale of pre-sliced
bread because the Feds thought it would save on waxed paper
used to wrap the sliced loaves. But the ban was rescinded when
the government realized it really wasn't saving money and was just
irritating the bejabbers out of a lot of sandwich makers.
Twinkies (1930)
As long as we're in the bakery aisle: One day in the spring of 1930,
James A. Dewar, an official for the relatively new Continental
Baking Co., realized that equipment the firm owned for making
2(}(j Part V: The Part of Tens
strawberry-filled "Little Short Cake Fingers" was being used only
when strawberries were in season. So Dewar tried filling the cakes
with a banana-flavored creme, and it worked.
illboard advertising Twinkle Toe Shoes, Dewar
named his confectionary creation "Twinkies." They sold in a
package of two for 5 cents (64 cents in 2008 money). Because of
a banana shortage during World War II, the company switched to
a vanilla-based filling. In 2007, the corporation that now owns the
brand was cranking out 500 million Twinkies a year.
Scotch Jape (1930)
One of the handiest household items was invented by a banjo
player who had a job with a sandpaper company. The musician/
inventor was named Richard Drew. He worked for the Minnesota
Mining and Manufacturing Co., which had started out as a mining
business but switched to making sandpaper products.
In 1925, Drew invented masking tape so auto painters could more
easily use two colors without the border between them getting
messy. In 1930, he came up with a variation on the tape, using
transparent cellulose. The new tape became a big hit in the Great
Depression because it allowed people to mend things rather than
replace them.
The name? The first version of the masking tape was light on
adhesive and fell off. A frustrated auto painter told Drew to tell
his "Scotch" (a pejorative for cheap or stingy) bosses to put more
stick' em on their product. Drew's employer, better known as the
3M Co., not only did so, but it also trademarked the name.
Atka-Seltzer (1931)
So, in 1928 this guy walks into The Elkhart Truth, an Indiana
newspaper, and notices no one is sick from the flu that's going
around. The editor tells the guy it's because of a mixture of aspirin,
bicarbonate of soda, and lemon juice that he whips together for
the staff.
Fast forward to 1931. The guy, whose name is Andrew H. Beardsley,
is chairman of the Dr. Miles Medical Company. He has his chief
chemist come up with an effervescent tablet with ingredients similar
to the newspaper elixir. They call it Alka-Seltzer, and by 2005 they
were selling 300 million tablets a year. Which is a lot of burping.
Chapter 16: Ten Things Invented or Popularized
Fritos (1932)
DropBerts
two didn't seem like a really good year to start a
daily in the snack food field. Undaunted, a Texan
named Elmer Doolin borrowed $100 from his mom and bought
a recipe, 19 retail accounts, and an old handheld device called a
"potato ricer." With it he churned out ten pounds a day of salted
corn chips that he sold for a nickel a bag.
Eventually, Doolin expanded his production facility from the
kitchen to the garage and got some better machinery. By the
21st century, the company he started was the largest salty snack
company in the world. The Frito Pie? Some say Doolin's mom
invented the combination of chili, cheese, and Fritos. Others say
a Woolworth's in Santa Fe, New Mexico, invented it. Fortunately,
Alka-Seltzer had been invented by then.
Toll House Cookies (1933)
Ever started baking something and found out you lacked a key
ingredient? Thankfully for cookie lovers everywhere, that's what
happened to Ruth Graves Wakefield. The owner of a lodge in
Massachusetts called the Toll House Inn, Wakefield was making
cookies one day when she found she had run out of baker's
chocolate. So she took a semisweet chocolate bar a fellow named
Andrew Nestle had given her and cut it into tiny chips.
When the cookies were done, she found the chips hadn't melted.
Everyone loved the cookies anyway. In 1939, Nestle began making
semisweet chocolate morsels. Milk has never been the same.
The Laundromat (W34)
Fritos weren't the only thing to come out of Texas in the Great
Depression. In 1934, a fellow named J.F. Cantrell looked around his
Forth Worth neighborhood and noticed that many of his neighbors
lacked a washing machine. So he went out and bought four electric
washing machines, installed them in a building, and charged
people by the hour to use them.
Thus was born the "washateria," later to be known as the laundromat.
Cantrell's customers were provided with hot water, but they had
to bring their own soap. Variations on laundromats over the years
have included restaurants, bowling alleys, and even a topless
nightclub. I don't know whether you had to bring your own soap to
that one.
21} 8 Part V: The Part of Tens
Tampax (1930)
DropBootas
called it "Tampax," which he said was a combination of "tampon"
and "vaginal pack." Unable to sell his invention, he sold the patent
and trademark to a business group that began marketing it in 1936.
Naturally, one of the big hurdles was to promote a product no one
wanted to talk about. So the company tried to closely tie its product
to the medical community. Its first ad proclaimed it was "accepted
for advertising by the American Medical Association." That last part
didn't mean it was endorsed by the AMA, just that it was accepted
as an ad in the AMA journal. Never mind, it worked. Tampax
eventually cornered 55 percent of the worldwide tampon market.
Nylon Bristle Toothbrush (1938)
In 1930, DuPont Chemical Company scientists came up with a sub-
stance that stretched and had a silky texture. And that's why you
probably don't brush your teeth with hair from a Siberian boar.
Toothbrush bristles were usually made from boar's hair up until
1938. But in that year, Dr. West's Miracle Tuft Toothbrushes came
along, with bristles made of something called nylon. They were
hard on gums at first, but scientists eventually found a way to
soften the bristles. And the folks at DuPont were so excited with
their new substance that they came out with another nylon prod-
uct the very next year: women's stockings. It caught on.
In 1939, executives at the Montgomery Ward department stores
asked Robert L. May, a company advertising copywriter, to come
up with an original story they could give away at Christmas. May
came up with a story about a red-nosed reindeer. The reindeer's
original name was Rollo, then Reginald. Finally, with the help of his
4-year-old daughter, May settled on Rudolph.
The story was an immediate hit, and the company distributed
2.4 million copies in the first year. The story and character were
turned into lots of products. And in 1949, a cowboy star named
Gene Autry recorded a song written by May's brother-in-law,
Johnny Marks, about Rudolph. You may have heard it.
Rudolph the Red-Nosed
Reindeer (1939)
Chapter 17
-So-Depressing
Things about the Great
Depression
7 he overall impression many people have about the Great
Depression is that everyone was pretty depressed all the time.
But as I explain in Chapter 10, Americans didn't walk around with
their chins dragging for an entire decade. Here's a list of ten things
about the Great Depression that were pretty cool, then and now.
Marx Brothers Monies
The Marx Brothers may have been the perfect comedic tonic for
the Great Depression. On-screen (and sometimes off it), the Marxes
(Marxists?) did what they wanted, went where they wanted, and said
what they wanted (except for Harpo, who never spoke on-screen).
For people who had been beaten down by forces they didn't
understand and couldn't control, the brothers' (yes, they were
really brothers) fresh and funny anarchy was a great way to
strike back at "the system," even if only vicariously. "Practically
everyone wants a good laugh right now," observed Variety of the
brothers' 1933 anti-war, anti-government film Duck Soup, "and this
should make practically everybody laugh."
The Marx Brothers starred in 1 1 films during the Great Depression,
including two that were versions of their Broadway plays The
Cocoanuts and Animal Crackers. Among the others were such gems
as Horse Feathers, A Night at the Opera, and A Day at the Races.
Shirley Temple
At less than four feet tall, Shirley Temple was the biggest thing in
Hollywood for much of the Great Depression. Little Shirley wasn't
250 Part V: The Part of Tens
vertically challenged. She was just a child, born the year before the
1929 stock market crash.
Id. For four straight years, from 1935 to 1938, the
oppet was the biggest box office draw in the country.
Her relentlessly cheery disposition and big smile were the perfect
antidotes for the Great Depression blues, and she was a walking,
talking, dancing, singing goldmine too. Besides making $5 million
a year for her studio (Twentieth Century Fox) and $300,000 a year
for herself, Temple spawned merchandise that included dolls,
soap, baby carriages, and ribbons — and a hair style that was
mimicked by hundreds of thousands of little girls.
When she grew up and eventually left show business, she didn't
do badly either. Temple became a U.S representative to the United
Nations and the U.S. ambassador to Ghana.
DrooBofiks
The Golden Gate Bridge
On May 28, 1938, President Franklin D. Roosevelt pressed a telegraph
key at the White House announcing to the world that something of
a miracle had occurred in San Francisco: A public works project
had been completed under budget and ahead of schedule.
Okay, so the real news was that the Golden Gate Bridge had opened,
connecting San Francisco and the eastern side of San Francisco Bay
by stretching across 4,200 feet of open water. That made the structure
the longest suspension bridge in the world at the time. Construction
took a bit more than four years and cost $35 million (about $5.4 billion
in 2008 dollars), paid for through a bond issuance by six northern
California counties. It also cost the lives of 11 workers.
The bridge actually opened to foot traffic the day before FDR
hit the telegraph key, and 178,000 people poured across the Art
Deco structure in both directions. Time magazine called the
bridge "the world's greatest by practically every measurement —
length of span, height, difficulty of achievement." Not a bad Great
Depression legacy.
The Wizard of Oz Morie
This film is one of the Great Depression's legacies that was more
appreciated in later years than it was at the time. Released in 1939,
the film got good, but not great, reviews. The New York Times
suggested that it was "all so well-intentioned, so genial and so
gay that any reviewer who would look down his nose at the fun-
making should be spanked and sent off, supperless, to bed." Time
_ Chapter 17: Ten Not-So-Depressing Things about the Great Depression 23 /
magazine noted that the pure fantasy parts were great, but "when it
descends to earth, it collapses like a scarecrow in a cloudburst."
was based on a beloved 1900 children's novel by L.
st Metro-Goldwyn-Mayer (MGM) a bit less than $2.8
million to make ($42.7 million in 2008 dollars) and took in a bit more
than $3 million when it was originally released. But it did quite well
when it was re-released in 1949, taking in another $1.5 million.
And after it began running on television in 1956, the film's popularity
soared, as did its standing in film history. In 2008, the American
Film Institute named The Wizard of Oz the best fantasy film of all
time and the film's song "Over the Rainbow" as the best movie
song of all time. I guess they just didn't appreciate winged monkeys
during the Great Depression.
DropBotte
"Wronq Waif" Corrigan
Douglas G. Corrigan had some solid aviation credentials when he
climbed into the cockpit of his airplane on the morning of July 1 7,
1938. He had been flying for 13 years, had helped build the plane in
which Charles Lindbergh became the first man to fly solo across the
Atlantic Ocean, and had himself flown across the United States solo.
On this particular morning, Corrigan had filed a plan to fly from New
York to California. Less than 30 hours later, he landed in Ireland.
Corrigan explained to bemused customs officials that it had been
foggy when he left New York and he had misread his compass and
had flown east instead of west. Everyone had a good laugh over
the mistake. Corrigan and his plane were put on an ocean liner and
sailed back to New York, where he received a good-humored ticker-
tape parade attended by an estimated 1 million people.
"Wrong Way Corrigan" became a nationwide phrase synonymous
with going in the wrong direction. But there's a big question
whether the pilot really did go in a direction he didn't intend. Turns
out Corrigan had been denied permission to make the dangerous
trans-Atlantic flight for three years before he made his trip. Many
people suspect that he was dodging aviation bureaucrats with his
"wrong way" story. If so, Corrigan, who died in 1995, never confessed.
The Debut of Bugs Bunny
The first screen appearance of the cartoon character the
Encyclopedia Britannica called "the most celebrated and endur-
ing lagomorph in worldwide popular culture" came in 1938.
Lagomorph? It's the mammalian order to which rabbits and hares
252 Part V: The Part of Tens
^ was, However,
DropBooks
belong. Anyway, the wisecracking, carrot-chomping rabbit showed
up in a cartoon starring Porky Pig called "Porky's Hare Hunt." He
however, a mere shadow of the rabbit that movie audiences
know and love.
In 1940, the bunny first uttered "Eh, what's up doc?" and in 1941
was formally christened with the name "Bugs." The appellation
came from the nickname of animator Ben "Bugs" Hardaway, who
had drawn a casual sketch of the character that was labeled "Bugs'
Bunny" by a colleague.
The rabbit quickly became a favorite of late Great Depression and
World War II audiences. Bugs sometimes emulated the on-screen
persona of another period favorite, Groucho Marx, using a carrot
the way Groucho used a cigar, making jokes directly to the audience,
and even using a Groucho line: "Of course you know, this means
war!" It must've worked: In 2002, TV Guide named Bugs the number-
one cartoon character of all time.
Baseball's All-Star Game
Baseball fans around the country picked up newspapers on July 7,
1933, and read about a new version of the national pastime, played
the day before in Chicago: "Out of the shooting stars of baseball's
dream game blazed the mighty war club of the one and only Babe
Ruth," the Associated Press reported, "to hoist the American
League to a spectacular 4-2 triumph over the National League in
the first all-star game in the majors' history."
The game, which had been played at Comiskey Park before a
crowd of 49,000, was the brainchild of Chicago Tribune sports
editor Arch Ward. Ward had a two-fold purpose: to have a big
sporting event to go along with the city's "Century of Progress"
World Exposition, and to raise money for a pension program for
veteran ballplayers.
The game couldn't have gone better if Ward had scripted it. The
teams were selected by fans, who voted on ballots provided at the
nation's ballparks and in newspapers. Ruth, the greatest player
the game ever produced, and who was near the end of his career,
hit a two-run homer and made a game-saving catch against the
right-field wall in the eighth inning. Initially planned as a one-time
event, the All-Star Game has been played every year since and has
become a midsummer staple.
_ Chapter 17: Ten Not-So-Depressing Things about the Great Depression
The Introduction of Muzak
DropBoote
een on a long elevator ride and wondered whom to
usic being played, it was George Owen Squier. Who?
Squier. He was a World War I two-star general who had the distinc-
tion of being the world's first airplane passenger when he flew for
nine minutes on a Wright Brothers plane in 1908. He also invented a
device that could be used to measure the speed of a projectile.
But Squier's lasting claim to immortality — or ignominy — was
something he came up with in 1922. It was a way to transmit
phonograph music over electric power lines. That same year,
he sold his invention to a firm called North American Company.
Twelve years passed before the firm began to market the invention,
which Squier had dubbed "Muzak," a cross between "Kodak"
(cameras were all the rage then) and "music."
Unfortunately for the company, in the dozen years it had taken
to get Muzak to the market, commercial radio had caught on, and
there wasn't much call for Muzak in private homes. Plus, it was
the middle of the Great Depression. Undeterred, the firm turned
its attention to public places, such as restaurants, office buildings,
and yes, elevators.
The product was helped along by several more-or-less scientific
studies in the 1930s that concluded low-volume, unobtrusive music
increased worker productivity, decreased absenteeism, and even
made cows give more milk and chickens more eggs. As of 2009,
Muzak was piping 2.6 million different songs into tens of thousands
of stores, offices, and elevators around the world, with a daily listen-
ing audience estimated at 100 million. So feel free to sing the praises
of the Great Depression's George Owen Squier. Or curse his name.
The World's — and Other — Fairs
As I note in Chapter 10, Depression-era Americans were crazy
about motor trips, and among the period's chief destinations were
various fairs and expositions around the country. And not just any
old fairs and expositions.
In 1933, Chicago celebrated its 100th birthday by putting on a
"Century of Progress" World Exposition. The fair, on the banks
of Lake Michigan, showed off ultra-modern architectural styles,
as well as old-fashioned fair attractions such as hoochie-coochie
dancers like Sally Rand and "Little Egypt." It also featured the
wonders of electricity with what was billed as "the world's largest
display of electric lighting." The expo drew 10 million people.
PartV: The Part of Tens
^ The following \
In 1935, San Diego hosted the California Pacific Exposition,
exposing tens of thousands to the wonders of Southern California.
The follpwing year, both Texas and Michigan staged lavish fairs,
e Golden Gate Exposition in San Francisco. But the
e was the 1939-40 New York World's Fair.
Developed on 1,216 acres that had previously hosted an ash dump,
the fair featured everything from a 250-foot parachute jump to
the broadcast of a speech by President Roosevelt over a medium
called television. (About 1,000 New Yorkers saw it.) There were
pavilions hosted by various nations, including one that promoted
the establishment — some day — of a Jewish state in the Middle
East. There was a gigantic diorama of future life in the United
States, complete with 500,000 individually designed homes, a
million miniature trees, and 50,000 miniature vehicles. (They
somehow forgot to include any churches and, after a lot of
complaints, were forced to add a few hundred.)
While the fair drew more than 45 million visitors during its two-
year run, it actually lost quite a bit of money. That's what happens
when you sandwich a world's fair between a Great Depression and
a world war.
erman
Yes, Superman! Strange visitor from another planet, with commercial,
promotional, and mass-merchandising powers far beyond those of
mortal comic book heroes!
Or something like that. In truth, Superman was from Cleveland, or
at least his creators were. It was 1933, and two 19-year-old guys
named Jerry Siegel and Joe Shuster were looking for a career path.
They came up with a cape-wearing superhero and for the next five
years shopped their idea around. Finally, in June 1938, the Man of
Steel made his debut in Action Comics No. 1 (a mint copy of which
was appraised at $340,000 in 2006).
The following year, Superman got his own comic book, and the
year after that, his own radio show. The radio show, in fact, was
where his fans first met Daily Planet editor Perry White, cub
reporter Jimmy Olsen, and Police Inspector Bill Henderson, all of
whom became regular members of the Superman family. It was
also on radio that Superman first encountered Kryptonite, the
debris of his home planet that is deadly to him.
Lois Lane? He met her in Action Comics No. 1. Even asked her on a
date. Well, he was faster than a speeding bullet.
Appendix
Dr°PBo?llr%rtheTReading
1
m f you've been with me since the opening pages of this book, you
«C may recall I point out in the Introduction that more books have
been written about the Great Depression than any other period in
U.S. history, except for maybe the Civil War.
Well, here's a list of some of them. They range from new to older,
and from general histories to tomes that laser in on a particular
facet of the time.
Best, Gary Dean. The Nickel and Dime Decade: American
Popular Culture during the 1930s. Praeger Publishers,
1993: From fads and crazes to shirt styles, a somewhat
scholarly look at some breezy, yet interesting, aspects of the
Great Depression.
i>* Congdon, Don (editor). The Thirties: A Time To Remember.
Simon and Schuster, 1962: An engaging and entertaining
collection of essays and articles about the Great Depression,
both contemporary and historical.
Egan, Timothy. The Worst Hard Time. Houghton Mifflin
Harcourt, 2006: A tale from Pulitzer Prize-winning journalist
Egan of those who were caught up in the Dust Bowl — and
persevered. Reads like a novel.
Gerdes, Louise I. (editor). The 1930s. Greenhaven Press,
2000: A nifty collection of contemporary and modern essays
and excerpts about issues and cultural events during the era.
Green, Harvey. The Uncertainty of Everyday Life, 1915-
1945. University of Arkansas Press, 2000: Provides a look at
how Americans made their way through life, including what
they ate, what they did for fun, and how they got old.
Kennedy, David M. Freedom from Fear: The American
People in Depression and War, 1929-1945. Oxford
University Press, 2001: The gold standard for history books
on this period. Eminently readable, sweeping in scope, and
highly detailed.
Lessons from the Great Depression For Dummies
t
5O0KS
W Lash, Josi
W Kyvig, David E. Daily Life in the United States, 1920-1940.
Ivan R. Dee, 2004: A nifty balance of the vital and the trivial.
Examines life in the 1920s and 1930s and includes a more
ook at daily life in six U.S. cities, large and small.
, Joseph. Dealers and Dreamers: A New Look at the
New Deal. Doubleday, 1988: Not so much a recitation of the
New Deal's programs as a story of the men and women who
helped President Franklin D. Roosevelt put his visions to
work.
McElvaine, Robert S. Down and Out in the Great
Depression: Letters from the "Forgotten Man. " University
of North Carolina Press, 2007: Just what the title says — a
collection of letters written to the White House during the
1930s.
v0 McElvaine, Robert S. The Great Depression: America,
1929-1941. Three Rivers Press, 1993: McElvaine takes an
unflinching look at the period and critiques some other
historical interpretations of it. Authoritative, if a bit cranky.
v0 Rothermund, Dietmar. The Global Impact of the Great
Depression, 1929-1939. Taylor & Francis, 2007: A thorough,
if a trifle tedious, look at how the rest of the world fared
during the period.
W Shlaes, Amity. The Forgotten Man: A New History of the
Great Depression. Harper Perennial, 2008: Shlaes, a
conservative economist and columnist, explores the era by
recounting the roles played by a diverse cast of characters
that range from Herbert Hoover's treasury secretary to the
kosher butchers from Brooklyn whose court case ultimately
ended one of the biggest New Deal programs.
w* Watkins, T.H. The Hungry Years: A Narrative History of
the Great Depression in America. Henry Holt and Co.,
1999: An excellent and thoroughly readable overview of the
period that focuses less on what went on in Congress and
more on what went on in the homeless camps.
Index
Drop Books
• Numerics •
5-day workweek, 160
18th Amendment, 171-172
20th Amendment, 209
21st Amendment, 172
40-hour workweek, 160
2007 as the "Great Recession,"
235-238
2008 economy, 1
Action comics, 254
advertising, 34-35, 162, 171
AFL-CIO, 192
Africa, impact of the collapse on, 118
African Americans
during the Great Depression, 77-80
northern migration during WWI, 31
racial stereotyping, 164
as sharecroppers, 77-78, 88-89
wealth disparity and poverty, 37-38
Agricultural Adjustment Act of 1933
enactment of, 94-95, 214
farm worker migration, 135-136
function and flaws of, 95-97
origins of, 16
unconstitutionality of, 97-98
Agricultural Workers Industrial
League, 185
agriculture. See also farm subsidies;
migrant farm workers
California system of, 138-140
demand and prices during WWI, 86
farm foreclosures, 88, 92, 134
farmers' "holiday" strikes, 90-94
federal help to, 89-90, 103-104
impact of the collapse on, 46, 87-88
impact of the crash on, 12
lessons learned, 103-105
"parity" prices, 90
during the Roaring Twenties, 36-38
Soviet collectivization, 122
tenant farmers, 77-78, 88-89
unionizing farm workers, 185
Aid to Dependent Children (ADC), 83
Aid to Families with Dependent
Children (AFDC), 83
Alka-Seltzer, 246
Allen, Frederick Lewis, 170
All-Star Game, baseball, 252
American economy before 1929
economic cycles of, 25-26
growth in wealth disparity, 35-38
history prior to WWI, 26-30
impact of WWI on, 30-31
Roaring Twenties, 32-35
what created the crash, 45-47
American economy since 1929,
235-238
American families. See also children
declining farm population, 104
depression-era "safety net," 82-83
homelessness, 56-57
impact of depression on, 1, 73-77
impact of the crash on, 11-12
minority groups, 77-82
wealth disparity and poverty, 35-38
American Federation of Labor (AFL),
178, 182-183, 192
American Film Institute, 251
American Liberty League, 150-151
American Medical Assocation, 227, 248
American Recovery and Reinvestment
Act of 2009, 238
American spirit
collapse of the economy and, 1 1-13
coping with the hard times, 13-15
individualism and self-reliance, 70
making do and improvising, 72-73
reluctance to accept relief, 67-69
tapping the ingenuity of, 71-72
American "wandering population"
about the, 127-128
"boxcar children," 131-134
California migration, 137-140
lessons learned from, 141-143
migrant farm workers, 134-137
25 S Lessons from the Great Depression For Dummies
American "wandering population"
(continued)
AmeriCorps programs, 141-142
"Amos 'n Andy" (radio show),
162, 164
Anderson Sherwood, 53
anti-union activities, 186-190
apple sellers on the street, 55
Aristotle, 173
Arizona, 71, 81
Arkansas, 69, 97, 134
assimilation, Native American, 81-82
assumptions about you, 3
Astor, Vincent, 207
automobiles
Americans' love affair with, 33-34
increased car ownership, 172-173
labor unrest in manufacturing, 188
lessons learned, 174
making do and improvising, 73
Autry, Gene, 248
•B •
Babbitt (Lewis), 33
baby boomers, 225-226
"bank holiday," 11,50-52
Bank of the United States, 49
banking system
collapse of the economy and, 11
before the crash, 48
Emergency Banking Act of 1933,
51-52, 213
failures after the crash, 49-50
FDIC-insured savings and, 61-62
Federal Reserve System, 20, 30
Glass-Steagall Act of 1933, 52, 216
Great Depression consequences,
231
history prior to WWI, 26-30
International Monetary Fund, 124
Panic of 1907, 29-30
Roosevelt "fireside chats," 163
speculation schemes, 230
The World Bank, 123
Barrow, Clyde, 154
barter systems, 73
Barton, Bruce, 35
Baseball's All-Star Game, 252
Baum, L. Frank, 251
Beardsley, Andrew H., 246
Becky Sharp (motion picture), 160
Belgian Congo, 118
Belgium, 108-109
Bell, Elliott W., 40
Bennett, Richard D., 115
Benny, Jack, 162
Bergoff, Pearl, 186
Berle, Adolf, Jr., 208
Bernays, Edward, 35
Best, Gary Dean, 255
bicycle races, 72
Big Little Books (children's
books), 169
"Big Steel," 189
Bilbo, Theodore G., 79
billboards, 173
Billikopf, Jacob, 76
birth rates, 75
black market, 71
"Black Thursday," 39-41
"Bonus Army," 11, 60-61, 200
"boondoggles," 219
bootleggers, 172
Boulder Dam, 200
Bound for Glory (motion picture), 244
"boxcar children," 13, 131-134
"Boxer Rebellion," 196
Boy and Girl Tramps of America
(Minehan), 131
bracero program, 142-143
"Brain Trust," 208
bread lines, 58-59
Breton Woods Conference, 123-124
British Commonwealth, 115
Bugs Bunny cartoons, 251-252
the bums blockade, 130
Bureau of Engraving and Printing, 52
Burns, Arthur T., 67
Bush, George W., 104, 210, 227
Bush administration, 63
business cycle, 18, 232-233
business failures, 231
"Business Plot," 150
Business Week (magazine), 95, 199
Index 259
Butler, Smedley, 150
buying on margin, 21-22
— ^ Byrd.iBithard, 47 ■
Droj^yooks
Cagney, James, 153, 156
California
barter and local currency, 73
gold and silver prospecting, 71
Golden Gate Bridge, 250
migration to, 13-14, 97, 134-136
as the "promised land," 137-140
Stanford University, 196
as transient magnet, 130
union strikes, 187
California Pacific Exposition, 253-254
Canada, impact of the collapse on,
114-115
Cantrell, J. F., 247
Capone, Al, 58
Cardenas, Lazaro, 116
Carter, Jimmy, 19
Casey-Kirschling, Kathleen, 225
censorship, 156, 166-167
"Century of Progress" Exposition, 253
Cermak, Anton, 60, 207-208
"Change to Win" labor coalition, 192
Chase, Stuart, 35, 204
Chicago, 111., 67, 252
Chicago World's Fair of 1933, 253
child-labor laws, 182
children. See also American families
assistance programs for, 83
hunger and malnutrition, 59
impact of Great Depression, 76-77
impact of homelessness, 56
minimum age to work, 182
"wandering population," 131-132
China, 196
church attendance, 67
Churchill, Winston, 213
Cinderella Man (motion picture), 244
Civil Rights Movement, 79-80
Civil War (1860-1865), 28-29
Civil Works Administration, 218-219
Civilian Conservation Corps (CCC)
creation of, 132-133,214
drop in crime rate from, 158
origins of, 13-14
work and results, 133-134
Clinton, William J., 141, 210, 227
coal "bootleggers," 71
Cogdon, Don, 255
Colbert, Thomas, 76
colonial governments of Africa, 118
Colorado, 71, 102
Columbia Broadcasting Service, 162
comic books, 169, 254
comic strips, newspaper, 168-169
Commodity Credit Corporation, 95
communism
inroads into America, 151
labor unions and, 183, 185
public relief seen as, 68
company unions, 177, 179-180
competitions in endurance, 72
Comstock, William A., 50
Coney, Homer C, 69
Congress of Industrial Organizations
(CIO), 183-184, 192
consumer debt, 34-35
Consumer Price Index (CPI), 23-24
Continental Baking Company, 245
conventions used in this guide, 2
Cooke, Jay, 29
Coolidge, Calvin ("Silent Cal"), 32,
89-90, 109, 198, 201, 225
Corrigan, Douglas ("Wrong Way"), 251
Coughlin, Charles E., 14, 147-149, 163
Count Basie, 170
Cox, James, 201
Cozad, Robert, 131
credit, ease of obtaining
bank failures and, 49-50
buying into the stock market, 38-39
buying on installment plan, 34-35
can lead to debt, 41-42
impact of deflation on, 24
leading to Great Depression, 10, 230
recessionary economics, 232-233
credit cards, 41-42
creditor nation, 31
Crimean War (1853-1856), 28
crime. See gangsters and crime
Crosby, Bob, 170
Cummings, Homer, 156
Lessons from the Great Depression For Dummies
Dark Ages, 1
Darrow, Clarence, 96
Davis, James Edgar ("Two Guns"), 130
Dawes, Charles G., 109-110
Dead End (motion picture, 1937), 243
Dealers and Dreamers: A New Look at
the New Deal (Lash), 256
debt
easy credit can lead to, 41-42
WWI cost and reparations, 108-110
WWI debt reduction, 114, 206
debtor nation, 31
deflation
farm programs to counter, 95
impact on housing market, 56
in recessionary economics, 24
role of, 9-10
deportation, 79, 81
depression. See also Great Depression
defined, 10
of 1873, 28-29
of 1893, 29
when recession becomes, 17-19
Dewar, James A., 245-246
Dies, Martin, 80
Dillinger, John, 154-155, 157
discrimination , 74, 77-82, 138-140
Disney, Walt, 167
disposable income, 32
distribution of wealth, 35-38, 230
divorce rates, 74-75
Doolin, Elmer, 247
door-to-door selling, 71
Dorsey, Tommy and Jimmy, 170
Dow Jones Industrial Average, 39,
231, 237
Down and Out in the Great Depression:
Letters from the "Forgotten Man "
(McElvaine), 256
Dr. Miles Medical Company, 246
Dr. West's Miracle Tuft
Toothbrushes, 248
Drew, Richard, 246
drought and grasshopper plague,
99-100
DuPont Chemical Company, 248
Durant, William C, 33
Dust Bowl era
drought and grasshoppers, 99-100
dust storms, 100-102
as environmental disaster, 98-99
farm income, 12
humor, 103
•£•
economic stimulus program, 238
economic terms and concepts
about the basics of, 17
federal funds rate, 20
fiat currency, 112
fiscal policies, 19
inflation and deflation, 23-24
liquidity, 62
"living wage," 191
monetary policy, 20
recession and depression, 17-19
stagflation, 234
stock market, 21-23
Economy Act of 1933, 213-214
Edgerton, J. E., 53
Edison, Thomas, 22
education, 132
Egan, Timothy, 255
18th Amendment, 171-172
Ellington, Duke, 170
Emergency Banking Act of 1933,
51-52,213
Emergency Committee for
Employment, 55
Emergency Farm Mortgage Act of
1933, 94, 214-215
Emergency Food Assistance Program,
104-105
endurance for sale, 71-72
England, Ark., 69
Equal Pay Act of 1963, 84
"Everybody Ought To Be Rich"
(Ladies' Home Journal), 32
Index 26 1
.f.
Drcffi
of 1938, 160,
fannies. SeeAmerican Tamilies
Famous Funnies (comic books), 169
farm cooperatives, 89
farm prices, 86-88
farm subsidies. See also Agricultural
Adjustment Act of 1933
impact on tenant farmers, 78, 96-97
modern-day criticism of, 104
origins during depression, 12, 37-38
farm surpluses, 96-98
Farmers' Holiday Association, 90-94
farms/farming. See agriculture
fascism, 149-151
Federal Bureau of Investigation (FBI),
155-157
Federal Communications Commission
(FCC), 162
Federal Deposit Insurance Corporation
(FDIC), 52, 61-62, 216
Federal Emergency Relief Act of 1933,
59,214,218-219
Federal Emergency Relief
Administration (FERA), 68
Federal Farm Board, 89
federal funds rate, 20
Federal Housing Administration, 215
Federal Reserve System
creation of, 20, 30
failure to react to the crash, 49-50
managing recession, 232-233
reacting to downturns, 62-63
Federal Surplus Commodity
Corporation, 104-105
Federal Surplus Relief Corporation,
96, 104
Federal Trade Commission, 216
Federal Transient Program, 57, 130
Fess, Simeon D., 68
fiat currency, 112
finance. See banking system; stock
market
Financial Stability Plan, 238
"fireside chats," 163
First Bank of the United States, 20
fiscal policy, 19-20
5-day workweek, 160
Florida land boom of 1925-1926, 37
Floyd, Arthur ("Pretty Boy"), 154
"food stamp" program, 83, 103
food surplus program, 104-105
Ford, Henry, 33, 36, 132, 217
Ford Motor Company, 186, 188
foreclosure auctions, 88, 92
The Forgotten Man: A New History
of the Great Depression
(Shlaes), 256
Fortune (magazine), 47, 128, 147, 153
40-hour workweek, 160
The Forum (magazine), 129
France, 108-109, 113, 117
Freedom from Fear.The American
People in Depression and War,
1929-1945 (Kennedy), 255
"Freedom to Farm" bill of 1996, 103
Freud, Sigmund, 35
Fritos corn chips, 247
Fuller Brush Company, 71
G
'G' Men (motion picture), 156
Gable, Clark, 167
Gabriel Over the White House (motion
picture), 242
gangsters and crime
American fascination with, 153-155
law and justice for, 155-157
lessons learned, 158
motion picture censorship, 166-167
Prohibition and, 171-172
Garner, John Nance, 68, 203
Geiger, Robert, 98
gender gap in wages, 83-84
General Electric Company, 22
general equilibrium, 17
General Motors, 33-34, 188
General Motors Acceptance
Corporation (GMAC), 34
Georgia, 186
Gerdes, Louise I., 255
German-American Bund, 152
Germany, 108-110, 120-121, 152-151
Lessons from the Great Depression For Dummies
Giddings, Franklin, 32
Girdler, Thomas M., 189
GlassjG^rter
~ , 52, 216
Ireat
Depression (Rothermund), 256
global recession, 18-19
globalization, 192. See also world
economy
gold hoarding, 50-51
Gold Diggers of 1933 (motion
picture), 242
gold standard
denned, 111-112
demise of the, 112-113
lessons learned, 124
monetary systems and, 23-24
role in world economy, 12-13
Roosevelt support of, 205
"the bombshell message," 113-114
Golden Gate Bridge, 250
Golden Gate Exposition of 1936, 254
Gompers, Samuel, 182
Gone with the Wind (motion
picture), 167
Goodman, Benny, 170
government regulation
Emergency Banking Act, 51-52
national banking system, 20
of radio and media, 162
stock market, 22, 42
government stimulus, 62-63, 238
The Grapes of Wrath (motion
picture), 243
The Grapes of Wrath (Steinbeck),
73-74, 134
Gray, Harold, 169
Great Britain, 108-109, 111-113,
116-117
Great Depression
"Black Thursday," 39-41
comparison to 2007, 235-237
dealing with the consequences, 231
as disaster, 10-13, 229-231
impact on world economy, 114-118
origins, 2-3, 45-47, 107-108
political transition during, 206-208
unemployment statistics, 53
Great Depression, fun things
baseball's All-Star Game, 252
Bugs Bunny cartoons, 251-252
Golden Gate Bridge, 250
Marx Brothers movies, 249
muzak ("elevator music"), 253
Shirley Temple as a star, 249-250
Superman comics, 254
The Wizard of Oz, 250-251
the World's Fairs, 253-254
"Wrong Way" Corrigan, 251
Great Depression, inventions and
popular items
Alka-Seltzer, 246
Fritos corn chips, 247
the laundromat, 247
nylon, 248
Rudolph the Red-Nosed
Reindeer, 248
Scotch tape, 246
sliced bread, 245
Tampax tampons, 248
Toll House cookies, 247
Twinkies, 245-246
Great Depression, motion pictures
Bound for Glory (1976), 244
Cinderella Man (2005), 244
Dead End (1937), 243
Gabriel Over the White House
(1933), 242
Gold Diggers of 1933 (1933), 242
The Grapes of Wrath (1940), 243
I Am a Fugitive from a Chain Gang
(1932), 241-242
Marx Brothers movies, 249
The Public Enemy (1931), 241
Shirley Temple movies, 250
Sounder (1972), 244
They Shoot Horses, Don 't They?
(1969), 243
The Wizard of Oz (1939), 250-251
The Great Depression: America,
1929-1941 (McElvaine), 256
"the Great Moderation," 232-233
"the Great Recession" of 2007,
235-238
"the Great Society," 124
Green, Harvey, 255
Index 263
Dro
Green, William, 182, 184
gross domestic product
defining recessioa by, 18
esm Dcrfr^|/o\i Confluences, 231
JWiWeVttctiVgS^venties, 32
7 recession losses, 236
Guthrie, Woody, 154
H
Haas, Earle, 248
Hardaway, Ben ("Bugs"), 252
Harding, Warren G., 31, 32, 109,
198, 201
Harper's Magazine, 167
Haskin, Frederic J., 55
health and disease
hunger and malnutrition, 57-59
invention of Alka-Seltzer, 246
invention of Tampax, 248
lessons learned, 227
making do, 73
migrant workers, 139-140
minority groups, 81-82
Roosevelt stricken with polio, 202
swing music as a hazard, 170
Hearst, William Randolph, 58
Heinze, F. A., 30
Heller, Samuel E., 56
Helping Families Save Their Homes
Act of 2009, 238
Hickok, Lorena, 57, 88, 145-146, 215
hitchhiking, 127-130
Hitler, Adolph, 120-121, 152, 208
hoarding and the money supply,
50-51
"Hollywood's Golden Age," 167
home foreclosure, 231, 236-237. See
also mortgages
Home Owners' Loan Act of 1934,
214-215
homelessness
"boxcar children," 13, 131-134
the bums blockade, 130
collapse of the economy and, 11
following the crash, 53, 56-57
Hoovervilles and, 56-57, 200
riding the rails, 128-129
"safety net" programs, 82-83
vagrancy, 129-130
"waiting for nothing," 129
Hoover, Herbert Clark. See also
Presidential elections
on banking system, 50
as butt of humor, 200
death of, 207
on debt repayment, 110
education and early career, 196-197
on homelessness and hunger, 58
on immigration policy, 80
on law enforcement, 155
meeting the "Bonus Army," 60-61
on monetary system policy, 113
as President, 198-200
on public relief, 66-68
on public works projects, 47, 55
reaction to the crash, 47-48
reading the comic strips, 169
role and responsibilities, 15-16
as scapegoat, 107, 195-196
as Secretary of Commerce, 31, 198
as WWI "Great Humanitarian," 197
Hoover, John Edgar, 156-157
Hoover, Lou Henry, 196
Hoover Dam, 200
"Hooverisms," 200
Hoovervilles, 56-57, 200
Hopkins, Harry, 57, 70, 212, 214,
218, 220
Housing Choice Voucher Program
(Section 8), 83
Hull, Cordell, 114
hunger. See also starvation
following the crash, 53
farm surplus programs and, 104-105
poor health and disease from, 57-59
"safety net" programs, 82-83
"slaughter of the innocents," 96
The Hungry Years: A Narrative History
of the Great Depression in
America (Watkins), 256
Hurley, Patrick Jay, 58, 70
26fy Lessons from the Great Depression For Dummies
a Chain Gang
:), 241-242
icons, book, 5-6
immigration, 38, 79-81. See also
minority groups; migrant farm
workers
Immigration and Naturalization
Service, 80
Independent Anthracite Miners
Association, 71
Indian Reorganization Act of 1934, 82
Indiana, 66
Individualism/self-reliance, 67-70, 218
infant mortality, 38
inflation
Consumer Price Index and, 23-24
German post-WWI, 108-110
paying for Social Security, 225-226
role of, 9-10
installment buying, 34
Insull, Samuel, 22
interest rates, 20-21, 32, 41, 48, 50,
62-63, 112-113, 231-232
International Bank for Reconstruction
and Development (IBRD), 123
International Centre for Settlement of
Investment Disputes (ICSID), 123
International Development
Association (IDA), 123
international economy. See world
economy
International Finance Corporation
(IFC), 123
International Ladies Garment
Workers Union, 180
International Monetary Fund
(IMF), 124
international organizations
economic cooperation among, 12-13
International Monetary Fund, 124
the World Bank, 123
investment trusts, 22-23
"invisible poor," 128
Iowa, 87, 90, 92-93, 196
Israel, establishment of, 254
Italy, 108-109, 112, 120
Jackson, Andrew, 27
James, Harry, 170
Japan, 119-120
Jay Cooke & Company, 29
Jefferson, Thomas, 85
Jell-0 desserts, 162
Jews
anti-Semitism, 147
banking system and, 49
creation of Israel, 254
German-American Bund and, 152
job security, 35-36
joblessness. See unemployment
Johnson, Charles S., 78
Johnson, Hugh ("Iron Pants"),
216-217
Johnson, Lyndon B., 124, 227
jukeboxes, 171
K
Kansas, 99, 102
Karpis, Alvin ("Creepy"), 154
Kelly, George ("Machine Gun"), 154
Kennedy, David M., 255
Kennedy, John F., 141
Kerr, Clark, 73
Keynes, John Maynard, 1, 108, 119
Kimball, James H., 100
King, William Lyon Mackenzie, 115
Kirstein, Lincoln, 153
Kromer, Thomas, 129
Kuhn, Fritz, 152
Kyvig, David E., 256
• L •
La Guardia, Fiorello, 61
labor unions
anti-union activities, 186
establishing the AFL, 182-183
establishing the CIO, 183
establishment of AFL-CIO, 184
farm workers and, 185
formation of "Change to Win," 192
higher wages, fewer hours, 181-182
Index 265
impact of the depression on, 15
lessons learned, 190-192
in tlmtfew Deal,
DropGto
176-178
strikes and violence, 186-190
Wagner Act of 1935, 180-181
welfare capitalism and, 36
WWI, 31, 175-176
Ladies ' Home Journal, 32
Lamont, Thomas W., 40, 110
Landon, Alf, 149, 163, 208, 219
Langer, William ("Wild Bill"), 93
Lash, Joseph, 256
Latin America, 117-118
Latinos/Hispanics, 80-81
the laundromat, 247
law enforcement, 153-157
leisure time
finding free time for fun, 159-160
flocking to the movies, 164-167
lessons learned, 173-174
live and recorded music, 170-171
love affair with the auto, 172-173
reading the comic strips, 168-169
repeal of Prohibition, 171-172
role of radio, 160-164
Lemke, William ("Liberty Bill"), 149
lessons learned, 4
applied to the 2007 recession,
237-238
automobiles mean congestion, 174
buying on credit leads to debt,
41-42
changes since 1929, 235-237
concept of volunteering, 141-142
constitutional amendments, 209
crisis requires cooperation, 123-124
declining influence of unions, 192
FDIC coverage of savings, 61-62
federal help to agriculture, 103-104
food surplus programs, 104-105
gender gap, 83-84
government response, 62-63
measuring recessions, 232-235
minimum wage, 190-191
monetary system flexibility, 124
paying for Social Security, 225-226
presidential transition politics, 210
recession increases crime rate, 158
"safety net" programs, 82-83
spending leisure time, 173-174
stock market can go down, 42
treatment of migrants, 142-143
universal health coverage, 227
what created the crash, 229-231
Lewis, John L., 179-180, 183, 189-190
Lewis, Sinclair, 33, 169
Liberty Magazine, 150
life expectancy, 38
Limbaugh, Rush, 147
Lindbergh, Charles, 251
Lippmann, Walter, 203
liquidity, 62
The Literary Digest, 71
"Little Egypt" (dancer), 253
Little Orphan Annie (radio program),
162, 169
"Little Steel," 189-190
"living wage," 191
Long, Huey P., 14, 147-149, 163
Louisiana, 70, 147
Louisiana Purchase of 1803, 27
Luce, Robert, 68
lynching, 78-79
M
MacArthur, Douglas, 60-61, 147, 200
Macfadden, Bernarr, 150
MacGuire, Gerald, 150
Major League Baseball, 252
making do and improvising, 72-73
malnutrition, 58-59
The Man Nobody Knows (Barton), 35
margin call, 21-22
Marks, Johnny, 248
marriage and childbirth, 74-75
Marx, Groucho, 252
Marx Brothers movies, 249
Massachusetts, 66, 247
Mast, Gerald, 167
May, Robert L., 248
McCain, John, 210
McElvaine, Robert S., 256
Medicare/Medicaid, 227
Mellon, Richard B., 178
"Memorial Day Massacre," 190
Mexico, 115-116, 142-143
Lessons from the Great Depression For Dummies
Migrant and Seasonal Agricultural
Worker Protection Act of 1983,
discrimination toward, 138-140
immigration restrictions, 80-81
labor unions and, 185
lessons learned, 142-143
Steinbeck portrayal of, 134-136
wealth disparity and poverty, 38
Miller, Glen, 170
Minehan, Thomas, 129, 131
minimum wage, 35, 181-182, 191
Minnesota, 99, 186
Minnesota Mining and Manufacturing
Company (3M), 246
minority groups. See also
immigration
federal farm programs and, 96-97
during the Great Depression, 77-82
impact of the crash on, 1 1-12
as migrant workers, 138
unionization of, 182-183
wealth disparity and poverty, 37-38
Missouri, 66, 87, 134
Moley, Raymond, 208
monetary policy, recessionary
economics and, 19-20
monetary systems
barter in lieu of, 73
Emergency Banking Act of 1933,
51-52
fiat currency, 112
gold standard, 12-13, 23-24,
111-113
history prior to WWI, 26-30
hoarding and the money supply, 50
lessons learned, 123-124
"the bombshell message," 113-114
Moore, A. Harry, 172
Moorhead, Frank, 70
Morgan, J. P., 30
Morse, Charles W., 30
mortgages. See also home
foreclosures
Emergency Farm Mortgage Act, 214
farm foreclosures, 88, 92, 134
impact of deflation on, 24, 56
National Housing Act, 215
sub-prime loans, 235
motels (motor hotels), 173
Motion Picture Producers
Association, 156
motion pictures
Bugs Bunny cartoons, 251-252
about the depression, 241-244
"Hollywood's Golden Age," 167
industry censorship, 166-167
Marx Brothers movies, 249
as rival to radio, 164-165
Multilateral Investment Guarantee
Agency (MIGA), 123
multilateral trade conventions, 17
Murphy, Donald R., 93
music and records, 170-171, 253-254
Mussolini, Benito, 120
mutual funds, 22-23
Mutual Radio Network, 162
muzak ("elevator music"), 253
The Nation (magazine), 70, 203, 227
National Association for the
Advancement of Colored People
(NAACP), 79
National Association of Credit
Men, 34
National Bank Act of 1863, 20
national banking system. See banking
system
National Broadcasting Company
(NBC), 162, 164
National Bureau of Economic
Research (NBER), 18, 233
National Children's Bureau, 131
National Civilian Community
Corps, 141
National Economic Council, 236
National Farmers Union, 90
National Geographic (magazine), 33
National Housing Act of 1934,
214-215
National Industrial Recovery Act
of 1933
creation of WPA, 217-218
reducing the workweek, 160
right to unionize, 179-180, 216
Index 267
— ^ JNatioaa^lonetary|5ystem ■
National Labor Relations Act of 1935,
180-181
Natio^a^lonetary System of 1908, 30
tet, 155
!stration, 216
National Socialists (Nazi Party), 152
National Union for Social Justice, 147
Native Americans, 81-82
Nazism, 152
Nebraska, 92
Nelson, George ("Baby Face"), 154
Nestle, Andrew, 247
New Deal
acronyms and origins of, 16
addressing critical needs, 211-213
assessing the impact of, 224-225
coining of the term, 203-204
constitutionality of, 97, 223-224
the first 100 days, 213-218
lessons learned, 225-227
political criticism, 151
relief programs, 68-69, 90-98,
218-219
Second New Deal, 219-220
Social Security Act, 221-222
Works Progress Administration,
220-221
New Mexico, 81
The New Republic (magazine), 93, 203
New York (state), 67, 155
New York City
apple sellers, 55
public works projects, 218
shoe shiners, 71
unemployment statistics, 67
New York Stock Exchange, 26, 28-29
New York Times, 1, 47, 71, 99, 151,
170, 199, 250
New York World's Fair of 1939-1940, 254
New York World-Telegram, 157, 204
newspaper comic strips, 168-169
The Nickel and Dime Decade:
American Popular Culture during
the 1930s (Best), 255
The 1930s (Gerdes), 255
Nixon, Richard M., 124, 234
Non-Partisan League, 179
Norris, George, 215
North Dakota, 93, 99
nylon, invention of, 248
0
Obama, Barack H., 63, 210, 227,
236, 238
Ohio, 77
Oklahoma, 134
Old Age Revolving Pension Plan, 146
Olson, Floyd B., 186
Oregon, 66, 73, 134, 196
Organization of Petroleum Exporting
Countries (OPEC), 234
organized labor. See labor unions
orphanages, 76
Ovaltine drink mix, 162
overproduction
agricultural crisis from, 12, 86-88
collapse of economy from, 45-47
leading to Great Depression, 230
surplus reduction programs, 94
P
-30
Panic of 1907, 29-
Peace Corps, 141
Pennsylvania, 70, 186
"penny" auctions, 92
Perkins, Frances, 212, 221
the Pittsburgh Courier, 164
politics
African American voting, 79, 149
"Business Plot," 150
communism, 151
depression-era, 14, 145-146
fascism, 149-151
impact of radio on, 163
played out in the comics, 169
presidential transition, 206-207, 210
of public relief programs, 68-69
repeal of Prohibition, 171-172
third-party efforts in 1936, 148-149
pooled investments, 22-23
poverty
minimum wage and, 181-182, 191
as a moral defect, 70
wealth disparity and, 35-38
208 Lessons from the Great Depression For Dummies
pregnancy and childbirth, 74-75
presidential elections
admpiiKtration transition, 206-207
14, 150-151, 163
179, 224
202
93, 148-149
28
3-199
impact of radio on, 163
Jackson in 1828, 27
Kennedy in 1960, 141
lessons learned, 209-210
Reagan versus Carter in 1980, 19
Roosevelt in 1932, 14, 16, 68
Roosevelt in 1936,
Roosevelt in 1940,
Smith in 1928, 150,
third-party efforts
Van Buren in 1836
Prohibition, 158, 171-172
prostitution, 128-129
The Public Enemy (motion picture,
1931), 153, 156, 241
public schools, 132
Public Works Administration,
217-218
public works projects
attitude of Hoover toward, 47, 55
drop in crime rate from, 158
Hoover's efforts in, 198-200
racial discrimination in, 79
Roosevelt's first 100 days, 211-213
WPA and, 220-221
pulp magazines, 169
pyramid schemes, 22-23
racial discrimination
African Americans, 77-80
Latinos/Hispanics, 80-81
Native Americans, 81-82
racial stereotyping, 164
radio
influence and impact of, 161-162
music adaptation to, 170-171
about the presence of, 160-161
Superman show, 254
Rand, Sally, 253
Reagan, Ronald, 19, 226
real estate bubble, 235
recession
defined, 10, 17-19
economic cures for, 19-20
"the Great Moderation"of, 232-233
post-WWII occurrences, 233-235
stock market role in, 21-23
recessionary economics, 9-10
Reconstruction Finance Corporation,
50, 52, 68
recreational spending. See leisure
time
Red Cross, relief efforts, 69, 89
Reed, B. F., 66
relief programs
discrimination in, 138-140
drop in crime rate from, 158
for farmers, 89-90
federal involvement in, 67-69
Hoover's attitude toward, 199-200
legacy of the depression, 237-238
mobilizing the local effort, 65-67
racial discrimination in, 77-82
religion, 67
Reno, Milo, 91, 93-94
Republic Steel, 189
Rhodesia, 118
riding the rails, 128-129
"roadblocks," 92
Roaring Twenties, 31-38, 128
Rockefeller, John D., 51
Rogers, Will, 68-69, 122, 163, 172, 208
Roller Derby, 72
Romer, Christina, 236, 238
Roosevelt, Eleanor, 79, 134, 201
Roosevelt, Franklin, as president
ability to make rain, 99
assassination attempt on, 207-208
campaign and election in 1932, 12,
14, 203-207
"court packing" scheme, 223-224
creation of the "Brain Trust," 208
death of, 169
declaring a "bank holiday," 50-51
on farm legislation, 98
"fireside chats," 163
labor union support for, 178-179
on monetary system policy, 113-114
opening of Golden Gate Bridge, 250
on race relations, 79
Index 269
Drop
on repeal of Prohibition, 171-172
restoring faith in banks, 51-52
role
responsibilities, 15-16
Mfo6'148-149
Roosevelt, Franklin, prior to
presidency
Assistant Secretary of Navy,
197, 201
education and early career, 200-201
as governor of New York, 202-203
onset of polio, 202
relations with Hoover, 197, 206-207
relief efforts as governor, 67
Roosevelt, James, 206
Roosevelt, Theodore, 85, 201
Roper, Elmer, 153
Rosenman, Sam, 204
Rosten, Leo, 164
Rothermund, Dietmar, 256
"rubber checks," 73
Rubio, Pascual Ortiz, 116
Rudolph the Red-Nosed Reindeer, 248
Russia. See Soviet Union
Ruth, Babe, 195, 252
•5«
"safety net" programs
creating a federal role in, 82-83
drop in crime rate from, 158
legacy of the depression, 237-238
lessons learned, 225-227
reacting to downturns, 62-63
Salvation Army, relief efforts, 58, 66
Schools, 132
Scotch tape, 246
SEC. See U.S. Securities and Exchange
Commission
Second Bank of the United States,
20, 26
Second New Deal, 219-222
Section 7 (a) (NIRA), 179-180
Section 8 Housing, 83
Securities Exchange Act of 1933, 216
Securities Investor Protection
Corporation, 42
self-esteem/self-worth, 11-12, 74-75,
218
Selznick, David 0., 167
Sevareid, Eric, 71
sharecroppers. See tenant farmers/
sharecroppers
Shaw, Artie, 170
Shaw, George Bernard, 164
shining shoes, 71
Shirley Temple, child star, 249-250
Shlaes, Amity, 237, 256
Shuster, Joe, 254
Siegel, Jerry, 254
Simpson, John, 90
sliced bread, 245
Smith, Al, 150-151, 198, 202
Social Security Act of 1935
enactment, 82
establishing, 221-222
lessons learned, 225-226
social services, impact of crash, 11-12
socialism, 68, 222
Soil Conservation and Domestic
Allotment Act of 1936, 97
Soil Conservation Service (SCS), 102
Sounder (motion picture, 1972), 244
soup kitchens/lines, 58-59
South Dakota, 88, 99-100, 102
Soviet Union
American communism and, 151
Stalin's rise to power, 122
U.S. humanitarian support to, 198
speculation schemes
banking system and, 49-50
buying on credit, 39
Florida land boom of 1925-1926, 37
leading to Great Depression, 230
stock market, 21-23
Springer, Gertrude, 218
Squier, George Owen, 253
stagflation, 234
Stalin, Joseph, 122, 151
Stanford University, 196
starvation. See also hunger
Arkansas "food riot," 69
desperation of hunger, 57-59
swallowing pride to avoid, 70
2 TO Lessons from the Great Depression For Dummies
statistics
agricultural, 86-87, 97
in WWI, 108
minority groups, 77
recession, 232
temperature and rainfall, 98-99
unemployment, 53, 67, 219-220
union membership, 176, 178, 192
wages, 137
Stegner, Wallace, 147
Steinbeck, John, 73, 134
stock index, 40
stock market
buying on credit, 38-39
buying on margin, 21-22
Dow Jones Industrial Average,
39, 231, 237
pooled investments, 22-23
speculation schemes, 230
2007 recession losses, 236-237
stock market crash
can happen again, 42
collapse of the economy and, 11
events leading to, 10, 45-47
of 1987, 63
sub-prime mortgages, 235
Suckow, Ruth, 167
suicides, 41, 76
Summers, Lawrence, 236, 238
Superman comics, 254
Supplemental Nutrition Assistance
Program, 83
Surplus Marketing Administration,
104
Swan, Gilbert, 76
Sweden, 113
• !•
Talmadge, Eugene, 186
Tampax tampon, 248
tariffs on imported goods,
47,110-111
tax cuts, 62-63
taxation, 66-67, 140
telephone service, 73, 161
television, 254
Temple, Shirley, 249-250
Temporary Assistance for Needy
Families (TANF), 83
tenant farmers/sharecroppers
African Americans, 77-78
federal farm programs and, 96-97
forced migration, 135-136
living conditions, 88-89
Tennessee Valley Authority
(TV A), 215
Texas, 70, 101, 134, 218, 247
Thayer, Walter N., 155
"the bombshell message," 113-114
They Shoot Horses, Don 't They?
(motion picture, 1969), 243
The Thirties: A Time To Remember
(Congdon), 255
Thomas, Norman, 150
Thompson, Florence, 14
Thompson, Lowell, 168
Thoreau, Henry David, 208
The Three Little Pigs (motion
picture), 167
Time (magazine), 72, 134, 250-251
Tocqueville, Alexis de, 65
Toll House cookies, 247
Townsend, Francis, 146, 148-149, 221
traffic jams, 174
transient aid programs, 129-130
Treaty of Versailles, 108-1 10
Truman, Harry, 227
Truth in Securities Act of 1933,
215-216
Tugwell, Guy, 208
20th Amendment, 209
21st Amendment, 172
Twinkies, 245-246
2007 as the "Great Recession,"
235-238
2008 economy, 1
Index 27/
u
w
following the crash, 11, 53-59
entrepreneurial spirit of, 71-72
Great Depression consequences, 231
local relief efforts to solve, 66-67
minimum wage rates, 181-182, 191
minority groups, 77-82
statistics, 53, 67
2007 recession, 236-237
following WWI, 31
unemployment compensation, 82
United Auto Workers (UAW), 188
United Mine Workers (UMW),
179-180
universal health coverage, 227
U.S. Army, 60-61, 133, 200
U.S. Bureau of Labor Statistics, 174
U.S. Constitution
18th Amendment, 158, 171
20th Amendment, 209
21st Amendment, 172
U.S. Department of Agriculture,
104-105
U.S. Forest Service, 133
U.S. Justice Department, 79
U.S. Securities and Exchange
Commission, 22, 42, 216
U.S. Steel, 189
U.S. Supreme Court
constitutionality of AAA, 97
constitutionality of NIRA, 160, 180
constitutionality of NLRA, 181
"court packing" scheme, 223-224
dealing with the New Deal, 223
USSR. See Soviet Union
Utah, 172
V
Van Buren, Martin, 28
Vargas, Getuillo, 118
Vietnam War, 234
VISTA (Volunteers in Service to
America), 141
volunteer organizations, 141-142
wages/wage cuts, 55
Wagner, Robert, 180
Waiting For Nothing (Kromer), 129
Wakefield, Ruth Graves, 247
Wallace, Henry, 89, 96
"wandering population," 127-130
"wandering youth," 131-132
War of 1812, 26
War of the Worlds (Welles), 161
Warburg, Paul M., 39
Ward, Arch, 252
Washington (state), 73, 134, 218
Watkins, T. H., 256
wealth distribution
collapse of economy from, 45-47
poverty and disparity of, 35-38
Webster, Daniel, 85
Weckler, Herman, 186
welfare capitalism, 36, 177-178
Welles, Orson, 161
White, E. B., 161
White, William Allen, 67, 122, 206
"wild boys," 131
Williams, Tennessee, 169
Willkie, Wendell, 179
Wilson, Woodrow, 30, 109
Wolfe, Thomas, 58, 128
women. See also American families
discrimination in the workforce, 74
employment and pay equity, 83-84
marriage and childbirth, 74-75
role in society, 35
in "wandering population," 128-129
Wonder Bread, 245
wooden nickels, 73
Woodin, William, 208
Works Progress Administration
(WPA), 16, 158, 220-221
the World Bank, 123-124
world economy
end of the gold standard, 124
global recession and the, 18-19
Great Depression consequences, 231
impact of the collapse on, 12-13,
46-47, 114-118
tariff wars, 110-111
Lessons from the Great Depression For Dummies
world economy (continued)
U.S. farm surplus and, 103
t-WWI role, 31, 107-108
— ^ U.S. asat-WWI role, 31, 1'
DropnooEs
Washington, 11, 60-61, 200
cost of war and reparations, 108-110
economic cycles prior to, 25-30
economic times following, 10
Hoover's role during, 197
impact on U.S. economy, 30-31
origin of Great Depression, 107-108
U.S. agriculture in, 86-88
World War II, 1, 151-152
World's Fairs of the era, 253-254
The Worst Hard Time (Egan), 255
"yellow dog contracts," 177
Young, Owen, 109-110
"yuppie food stamps," 41
Zangara, Guiseppe, 207-208
History
• Explanations of basic economic
terms and concepts
• Discussion of the U.S. political
climate that fueled the country's
economic woes
• What it meant to live in
"Hooverville"
• What Hoover and FDR thought
about each other
• What happened across the globe
during the Great Depression
• The story of how organized labor
grew and changed in response to
hard times
• What FDR accomplished during
his first 100 days as president
• How the Great Depression's legacy
affects your life today
Your concise guide to
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and lines formed for bread, soup, and jobs as
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